Document of The World Bank Report No. 15379-fZ STAFF APPRAISAL REPORT REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT NAY 23, 1996 Agriculture, Industry and Finance Division Country Department III Europe and Central Asia Region CURRENCY EQUIVALENTS Currency Unit = Tenge (T) I Tenge = 100 Tiyns AVERAGE EXCHANGE RATES Tenges per US$1 1994 36.10 1995 61.37 2nd Quarter, 1995 64.45 3rd Quarter, 1995 59.68 4th Quarter. 1995 63.11 As on April 12, 1996 65.43 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS AAS - Agricultural Academy of Sciences CF - Committee on Forests BVO - River Basin Organization CROIS - Comprehensive Rehabilitation of Irrigation & Drainage System CWR - Committee for Water Resources EA - Environmental Assessment EIA - Environmental Impact Assessment FSU - Former Soviet Union GOK - Government of Kazakstan HS - Hydrometeorological Services ICB - International Competitive Bidding ICC - Inter-ministerial Coordinating Committee IDIP - Irrigation & Drainage Improvement Project IPLR - Integrated Program for the Development of Land Reclamation IPM - Integrated Pest Management MOA - Ministry of Agriculture MOEB - Ministry of Ecology & Bioresources MOG - Ministry of Geology MOH - Ministry of Health NCB - National Competitive Bidding NS - National Shopping O&M - Operation and Maintenance OCC - Oblast Coordination Committee OD - Operational Directive OP - Operational Policy PIP - Project Implementation Plan PIU - Project Implementation Unit POE - Panel of Experts PPF - Project Preparation Facility R&D - Research and Development SANEPID - State Sanitary - Epidemiological Service under the MOH SEA - Sectoral Environmental Assessment SEE - State Ecological Expertise (Review) SEI - State Ecological Inspection SOE - Statement of Expenses TA - Technical Assistance TOR - Terms of Reference WUA - Water User Association KAZAKSTAN - FISCAL YEAR - 11 - STAFF APPRAISAL REPORT REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT CONTENTS Page No. LOAN AND PROJECT SUMMARY .v. v 1. THE AGRICULTURE SECTOR AND BANK STRATEGY A. Introduction .......................................... 1 B. Sector Overview ......................................... 1 C. Agricultural Policy Reforms . .................................. 2 D. Sector Strategy and Bank Support . ................................ 3 E. Bank Lending Experience . .................................... 4 II. THE WATER SECTOR AND IRRIGATION SUB-SECTOR A. Water Resources ......................................... 6 B. Irrigation and Drainage Development ........ ..................... 6 C. Institutional and Legal Framework .......... ..................... 7 D. Water Resources Planning and Management ......................... 9 E. On-Farm Water Management ..................... 10 F. Financial Issues ......................................... 10 G. Environmental Sector Issues . .................................. 11 H. Bank Environmental and Water Strategy in Kazakstan .................. 12 I. Ten- and Five-Year Irrigation Investment Plans ...................... 13 III. THE PROJECT AREA A . G eneral ............... ... ....... ............ ... .... ... 14 B. Agriculture .14 C. Privatization .15 D. Socio-Economic Status .16 IV. THE PROJECT A. Background ........................................... 17 B. Project Objective and Rationale for Bank's Involvement ................. 17 C. Project Selection Criteria . .................................... 17 D. Main Components . ....................................... 18 E. Detailed Features .......................................... 18 F. Implementation Schedule . .................................... 23 G. Project Costs ........................................... 24 H. Financing Plan ........................................... 24 1. Procurement ........................................... 25 J. Disbursement ........................................... 29 K. Status of Project Preparation . .................................. 30 L. Participation ........................................... 30 M. Environmental Aspects and Impacts ............................. 31 N. International Waterways . .................................... 31 - iii - V. PROJECT IMPLEMENTATION A. Project Organization ...................................... 33 B. The Ministry of Agriculture . ................................. 33 C. The Ministry of Ecology and Bioresources ........ ................. 34 D. Organization of Environmental Sub-Component ...... ................ 34 E. Organization of Agricultural Component . ......................... 35 F. Project Preparation and Bank Review . ............................ 35 G. Arrangements for Construction ................................. 35 H. Farmers' Participation ................................... 36 1. Financing of Sub-Project Works and Equipment ....... ............... 37 J. Plans for Operation and Maintenance . ............................ 37 K. Water Users Associations ................................... 38 L. Project Monitoring and Reporting . .............................. 38 M. Bank Supervision .................................... 39 N. Accounts and Audits ................................... 39 VI. PROJECTS BENEFITS AND RISKS A. Introduction ............. 40 B. The Sub-Projects ............. 40 C. Benefits and Costs ............. 41 D. Economic Analysis ............. 43 E. Risks .............. 45 F. Financial Analysis ............. 47 VII. ISSUES TO BE DISCUSSED, AGREEMENTS TO BE REACHED AND RECOMMENDATIONS .49 ANNEXES Annex A Farm Privatization ...................................... 52 Annex B Overview of Institutional and Legal Framework ...... ................ 57 Annex C Irrigated Crops by Oblast .................................... 62 Annex D Project Area Soil and Water Conditions ......... .................. 63 Annex E Status of Project Farms ..................................... 64 Annex F Project Selection and Planning Criteria ......... .................. 66 Annex G Project Summary Table ..................................... 68 Annex H Summary Project Works .................................... 69 Annex I Description of Sub-Projects for Years One and Two ..... .............. 70 Annex J Agricultural Development Component ......... ................... 73 Annex K Environmental Component .................................... 90 Annex L Implementation Schedule ..................................... 95 Annex M Project Cost Tables ...................................... 96 Annex N Procurement Plan ...................................... 102 Annex 0 Estimated Disbursements Profile ............ .................. 104 Annex P Participation Guidelines .......... ..... ............... . . 106 Annex Q Typical Sub-Project Plan ................. 111 Annex R MOA Organization ................. 112 Annex S Summaries of Terms of Reference . ............................ 114 Annex T MOEB Organization .................................. 122 Annex U Monitoring Indicators for Project Supervision ........ .............. 124 Annex V Proposed Project Supervision Plan . ............................ 132 Annex W Economic and Financial Analysis .................... ........ 134 Annex X Sector Environmental Assessment ............................. 143 - iv - CHARTS 1. Structure of Ministry of Agriculture ............................ .149 2. IDIP Organization Chart ......................................... . 150 3. Project Implementation UniL ............................ .151 4. Ministry of Ecology and Bioresources. ............................ .152 5. State Committee of Water Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 TABLES Table 3.1 Area Planted to Irrigated Crops.. ......................... .14 Table 3.2 Irrigated Crops Yields ........................... 15 Table 4.1 Components Project Cost.Summary .......................... 24 Table 4.2 Financing Plan .......... . . . . 25 Table 4.3 Summary of Proposed Procurement.Arrangements ..................... . 27 Table 4.4 Disbursement Categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 Table 6.1 Economic Rates of Return. . .................. 44 Table 6.2 Sensitivity Analysis ... . ................................... 45 Table 6.3 ERR for Reduced Yields and.Prices ........................... 46 Table 6.4 Financial Analysis ... . ................................... 47 MAP IBRD 27736 - v - REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT LOAN AND PROJECT SUMMARY Borrower: Republic of Kazakstan Implementing Agency: Ministry of Agriculture Beneficiaries: Ministry of Agriculture, Ministry of Ecology and Biological Resources, Participating Farms Poverty: not applicable Amount: US$80 million equivalent Terms: Payable in twenty years, including five years of grace at the Bank's standard variable interest rate for currency pool loans. Commnitment Fee: 0.75 percent on undisbursed loan balances, beginning 60 days after signing, less any waiver. Financing Plan MUlions of USS Item Item______________ Local Foreign Total IBRD 30.99 49.01 80.00 Government' 37.84 0 37.84 H Total Project Costs 68.83 49.01 117.84 Economic Rate of Return: 27 percent Staff Appraisal Report: 15379 KZ Map: IBRD Map No. 27736 Project ID Number: KZ-PA-8510 I/ Including USS17.8 million of taxes and duties. REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT STAFF APPRAISAL REPORT I. THE AGRICULTURE SECTOR AND BANK STRATEGY A. Introduction 1. 1 The Government of Kazakstan has requested World Bank assistance to finance a project in support of irrigation and drainage rehabilitation and improvement. The proposed project would rehabilitate irrigation and drainage infrastructure covering some 30,000 ha. of on-farm irrigation as well as limited inter-farm works, promote development of privatized farms through pilot initiatives for farmer training and information, and strengthen the environmental capacity of concerned ministries and agencies. The proposed project is the fourth bank-financed investment project in Kazakstan and the first in agriculture. B. Sector Overview 1.2 Agriculture is a major contributor to Kazakstan's economy. It accounts for about one- quarter of GDP and around 23 percent of total employment. Livestock contributes between 50 to 60 percent of total output with beef, mutton, dairy products and wool being the major livestock products. The crop sector is dominated by grain, mostly wheat, which accounts for about 65 percent of total crop output. Other important crops are fodder crops, potatoes, and vegetables. Agriculture continues to be a major source of export earnings with agricultural products constituting about ten percent. Major exports include grain, meat, and wool. 1.3 About 200 M ha, or 75 percent of Kazakstan's total land area, is used for cropping and grazing, with most agricultural land-devoted to extensive livestock grazing. Kazakstan can be divided into three distinct geographical areas: the South, where most irrigated agriculture takes place; the North where most rain-fed crop and livestock production occurs; and the expansive central region, which is suitable mainly for extensive grazing. Cropped land covers about 35 million ha, of which nearly 33 million ha is rain-fed and about 2.4 million ha is irrigated. Cereals cover about 62 percent of total cropped area with forage and vegetable crops accounting for most of the rest. 1.4 Kazakstan has a typical continental climate with cold, dry winters and hot dry summers. Annual precipitation in the agricultural lands varies from less than 150 mm in the extreme Southwest to nearly 450 mm in the foothills of the Southern mountains. Kazakstan is primarily located on steppes and much of the Southern part of the country is desert. Soils are moderately fertile. Soils in the desert area have a high natural salt content and tend to be alkaline, making them vulnerable to surface salinity under conditions of poor irrigation and drainage. About 26 percent of the land is vulnerable to erosion, primarily by wind. 1.5 Most production takes place on the recently privatized successors to state and collective farms. State farms, which numbered about 2,100 before privatization, were particularly large, averaging 80,000 ha in 1992 of which just over 13,000 ha were cultivated. Nearly a third of these farms are located in the North and produce rain-fed grain. Another 600 farms are engaged in extensive sheep raising and 380 are intensive dairy and beef operations. 1.6 Collective farms or their successors number about 430 and are smaller than state farms with average cultivated area of about 9,800 ha. Collectives tend to be more diversified in production than the former state farms but traditionally in terms of management there has been little difference between the two. As in other parts of the FSU, private plots on state farms and near urban centers are playing a growing role in total output particularly for meat, milk, vegetables and fruit. 1.7 Performance in agriculture since independence has been poor. Output in the sector fell by about 13 percent in 1994, following a 12 percent decline in 1993 and an average 5.3 percent decline per annum between 1990 and 1993. Last year saw another poor harvest with grain production particularly hard hit. Declining yields are primarily the cause of lower output though area cropped has also declined. Yields have been adversely affected by sharp declines in input usage. Fertilizer utilization has dropped by two-thirds since 1992, fuel shortages have disrupted planting and harvesting activities, and worn-out farm machinery has not been replaced. 1.8 The financial position of most farms has deteriorated markedly in the past three years, with a sharp increase in the number of farms reporting losses. The losses have been due largely to official pricing and marketing policy that depressed producer prices well below world market levels while the prices of inputs were liberalized. The resulting cost price squeeze served to tax the sector by an estimated US$323 to US$756 million in 1993. C. Agricultural Policy Reforms 1.9 The Government has accelerated its reform program in agriculture over the last two years in an effort to stem the crisis in the sector and restore growth in output and improve productivity and rural incomes. The focus of the reform program in agriculture is on three key areas: (i) price and government trade policy; (ii) marketing reform; and (iii) farm privatization and restructuring. Price and trade reform is aimed at ending the cost-price squeeze facing agriculture through measures to allow farm prices to rise to world market levels. The measures include an end to compulsory delivery of agricultural commodities to the Government at fixed and low prices relative to world market prices and trade reforms aimed at ending restrictions on agricultural exports. Government procurement of commodities has decreased from over 20 million tons per annum as recently as 1992 to less than 800,000 tons for 1995, and new rules for public procurement have been implemented to make it voluntary with competitively determined prices. 1.10 Market reforms are aimed at privatizing the state enterprises that were formerly responsible for all aspects of marketing and processing of agriculture commodities and encouraging the entrance of new trading, input supply and processing firms into the sector. Privatization of the state agricultural enterprises is nearly complete in a process that has transferred ownership to the suppliers of the enterprises and the workers. New entrants to the sector are being encouraged by the gradual development of a legal, and regulatory environment conducive to commerce. Already much of the old structure for marketing and processing of livestock products, and fruits and vegetables has been bypassed by private sector marketing channels. Less progress has been made in the development of alternative channels for grain trade though even there private traders and exporters are offering increasing competition to former state-owned firms. 1.11 Farm privatization also has moved quickly (Annex A). Farm privatization in Kazakstan began seriously in 1991, with the advent of legislation defining objectives and methods. Subsequent legislation has further refined the process and the timetable including passage of the end of 1995 of a new land code and supporting legislation on land registration. By the end of 1995 over 80 percent of former state farms had gone through the privatization process and the remainder are slated to be privatized early in 1996. Privatization in Kazakstan refers to land management, and does not result in private land ownership. Rather, the State retains ownership of all land and confers inheritable use rights to the workers, the managers, and sometimes to other non-agricultural people in the farming community. These lease rights can be sold, sub-let, bequeathed, or otherwise transferred. On the farm level, the privatization process involves three steps. First the farms' land and non-land assets are evaluated and entitlement to land leases and shares of non-land assets are distributed to eligible farm members. Second, a period of formal and informal consultations are held with the farming community on the options and process of privatization. Finally, a general assembly meeting of the farming community is held during which the farm members decide on the post-privatization structure of the farm and the conditions of membership/ownership, and elect the manager. 1.12 The initial decisions on the ownership and management structures have in most instances been to adopt a cooperative ownership structure with management arrangements and operating procedures similar to the former state model. This initial lack of restructuring can be traced to the harsh economic environment within which the process is unfolding coupled with weaknesses in implementing the privatization program. Information on alternative farm structures is often not available or inadequately explained, and farm members are unclear about the procedures if they chose to opt out of the cooperative and establish their own operation. Despite these weaknesses, there are growing indications that the first decisions on how a farm will be structured are not final. Some farms have changed ownership structures and managerial arrangements, often more than once. These changes are usually made to accommodate the desire of some members to break away from the larger group and establish their own enterprises. In such cases the management arrangements become more complex, incorporating a growing number of units, either individual family farms, group farms, cooperatives, or other smaller units. This process is expected to accelerate as the sector becomes more commercially oriented and experience is gained with privatization procedures, and the cost-price squeeze is eased with the completion of price and trade reform. D. Sector Strategy and Bank Support 1.13 The Bank's strategy to assist the Government of Kazakstan is founded on four key pillars including support for: (i) macroeconomic stabilization and price reform; (ii) transformation of the economy to a competitive, market based system through privatization of state enterprises and encouraging competition from new market participants; (iii) strengthened capacity for social protection; and (iv) rehabilitation and improved management capacity for public infrastructure. For agriculture, the Bank's approach rests firmly on these pillars. The Agricultural Sector Report of September 1994 identified low output prices relative to world market prices as a fundamental factor affecting performance and profitability in agriculture and suggested a number of reforms in pricing, government procurement of agriculture commodities, and in trade policy designed to bring agricultural prices in line with world market levels. These reforms were incorporated into the Development Policy Letter agreed in the context of the FY95 Structural Adjustment Loan (SAL - Ln No. 3900). 1.14 The Sector Review also identified farm privatization and restructuring as important elements of the reform program and the SAL includes conditionality on appropriate land legislation in support of the development of land markets. Also, a proposed Land Registration Project (FY97) is intended to strengthen the system for registering rights to land and real property. A proposed Agricultural Privatization Support Project (FY98S) is intended to provide post-privatization support to - 4 - emerging private farms. The proposed IDIP project would complement these initiatives and provide support for the rehabilitation of irrigation and drainage infrastructure on irrigated farms that have been privatized and are undergoing restructuring. E. Bank Lending Experience 1.15 The Bank only has recently begun to lend for agricultural projects in Eastern Europe and Central Asia and has limited project experience with countries in transition. The experience with irrigation projects in these countries is limited to two irrigation rehabilitation projects, one in Albania and one in Armenia. Common issues that have arisen for agricultural projects in general and these two irrigation projects are: * the need for a stable macroeconomic environment and a favorable incentive structure for the sector; * the importance of local ownership of project design and commitment to its implementation; * the necessity of introducing rigorous economic and environmental criteria in the design of programs and projects; * the importance of an adequate farm privatization program in conjunction with initiatives to rehabilitate farm infrastructure, including irrigation facilities; * the need to transfer responsibilities and at least some of the operation costs and maintenance to water users; and * the necessity for strong oversight and implementation capacity by the implementing agency to assure that construction of irrigation work adhere to international standards of quality. 1.16 These issues have been shared with Government and every effort has been made in project preparation to address them in the design of the project. Implementation of the project will benefit from the fact that Kazakstan has been one of the most successful and persistent countries in Central Asia in pursing macro-economic and marketing and pricing reforms. It currently is implementing an aggressive reform program with support of the SAL and an a IMF program that is intended to accelerate progress with stabilization and remove remaining price and trade distortions affecting the sector. The importance of beneficiary participation is being emphasized through a careful consultation process during project preparation and implementation. Strict economic and environmental criteria were utilized to screen potential projects in an exhaustive process to cull projects with unsatisfactory economic rates of return or with potentially detrimental environmental impacts. Project design also has focused on improving cost recovery for inter-farm systems and quality of construction. 1.17 More generally, OED's 1994 Review of World Bank Experience in Irrigation provides evidence on performance and recurrent issues in some 200 Bank-financed irrigation projects. Although 67 percent of the projects were rated satisfactory (84 percent when weighted by size of area served), operational performance has in general been poorer than anticipated at appraisal. It was found that projects with relatively low unit costs per hectare tended to be more successful (project cost averaged US$4,800 ha)-'. The proposed project is in line with the report's major reconimendation that the Bank should shift emphasis from financing new irrigation to upgrading existing irrigation. Critical factors identified for project success include: quality of system design; quality of construction works; adequacy of O&M, and; the need to foster the conditions associated with the formation of durable irrigator groups. The review also indicated that O&M tends to be best in irrigation agencies that are financially autonomous; the District Water Committees in Kazakstan are now self-supporting. It was also recommended that O&M entities should receive their funding directly from the irrigators where feasible; also this is the case in Kazakstan. 1/ For the proposed project, average per ha investment cost is about US$2,250. - 6 - II. THE WATER SECTOR AND IRRIGATION SUB-SECTOR A. Water Resources 2.1 Water resources are limited. Annually recurring surface water resources total about 100 km3 (billion cubic meters), of which about 44 km3 originate in other countries. It is estimated that about 43 km3 are available for irrigation development. Less than 0.1 percent of the total land area is under irrigation at present, with limited water supply for expansion. Potential annual yield of usable groundwater is estimated at 15 km', mostly in the Southeast, of which some 2.5 km3 has been developed. Groundwater supplies at present are used for irrigation of about 85,000 ha. 2.2 Many rivers, especially the larger ones, have been provided long-term and seasonal regulation by reservoirs and storage ponds. Kazakstan now has 204 reservoirs, with a total capacity of 95.5 km3. The largest reservoirs are found in the basins of the Aral Sea, Lake Balkash, and the Irtysh River. The salinity of reservoirs varies from 0.12 g/L in East Kazakstan to about 2.1-2.7 in the central part of the country, with most reservoirs around I g/L. B. Irrigation and Drainage Development 2.3 "Regular"Z' irrigation is practiced on 2.4 million ha (1990), of which 95.6 percent is by surface water, 3.6 percent by groundwater, and 0.8 percent by sewage water. Surface irrigation is used in 70 percent of the area, sprinkler in the remainder In addition, there are 878,500 ha of flood irrigated lands. Drainage facilities have been provided for 623,000 ha (26 percent) of the regular irrigated lands. Seventy percent of the irrigated area is in the five Southern oblasts. It is estimated that only about 70 percent of the land irrigated in 1990, or 1.7 million ha, is actually being irrigated in 1994. Almost 680,000 ha (30 percent) of the lands are out of use because of soil salinization, water logging, broken or incomplete distribution systems, improper farming practices, limited inputs such as fertilizers and fuel, and, in some instances, lack of water. 2.4 Major crops under irrigation in descending order of planted area are fodder crops (about half the area) mainly alfalfa, winter wheat, maize (grain and silage), cotton, rice, sugar beets, vegetables/onions/fruits, oil crops, potato and tobacco. Fodder crops are required for winter feeding of the large livestock population and grown in many areas where salinity and poor drainage prevent other crops from being grown. Total sown area, especially for fodder crops, is decreasing and crop yields have declined from 15 percent to 40 percent in the last five years, primarily due to economic disruption. 2.5 Major inter-farm facilities include about 14,000 km of channels. Major problems in the inter-farm systems include low operation efficiencies due to seepage in unlined canals, resulting in water losses and waterlogging of adjacent lands. Maintenance is deficient and declining due to staff cuts and shortage of funds. Water scheduling is quite rigid, in some cases leading to over irrigation and a rise in the water-table. Privatization may present cost and operational problems in delivering water to the smaller farm units. 2.6 The majority of irrigated lands in the five Southern oblasts, almost 90 percent, are irrigated with surface methods, usually furrow and borders. About 75 percent of the irrigated land in 2/ 'Regular' irrigation means irrigation by some specific technical, constructed method, such as border or sprinkler, at planned intervals. - 7 - the other oblasts is irrigated by large-scale sprinkler systems. Overall, about 1.65 million ha are irrigated by surface and 0.68 million by sprinkler. Drip systems are rare and used mainly on an experimental basis. The major on-farm problem is the lack of funds for maintenance and rehabilitation of facilities, affecting yields and area irrigated. 2.7 Drainage systems have been constructed on only about 624,000 ha, or 26 percent of the irrigated land. About 60 percent is by open ditch, 32 percent by vertical wells, and 7.8 percent by buried horizontal pipe. There has been little development of new drainage and, little maintenance done since about 1990. Still only 3.6 percent (86,000 ha) of the irrigated land has a water table less than 1.5 m below the surface, and only 2.2 percent of the irrigated land (52,000 ha) is classed as highly saline. However, and additional 170,000 ha (7.1 percent) are classed as mildly saline and that percentage will undoubtedly increase (as will the percentage of highly saline land) if drainage systems are not improved. Although new lands are not being developed for irrigation, new drainage works are also required for irrigated lands that have not been previously drained. 2.8 Much of the agricultural drainage system is not functioning properly because of deficiencies in design, construction and maintenance. A significant problem also exists with disposal of highly mineralized water. A strict policy of limiting or excluding disposal of drainage outflows in the main river systems leads to a severe depletion of flows in some rivers. Several of the major drainage systems have outlets into lakes or evaporation ponds whose capacity is exceeded by the drainage inflows. 2.9 Irrigated agriculture in Kazakstan is extensive in terms of the large fields that are irrigated, the crop technologies applied and the type of farm machinery used. With energy now being more realistically priced, such an extensive system that requires long and inefficient water delivery and tractor hauls cannot survive competition from the world market and therefore has to change. To save energy, different on-farm operations need to be combined, requiring different types of machinery and equipment. Besides the fact that lands have been taken out of use, and the productivity is declining, the most pressing problem in irrigated agriculture is the environmental consequence of poor water management and excessive water use from surface water resources, which in the Syr Darya Basin has contributed to the drying of the Aral Sea. On the other hand, re-use of (good) drainage water is seldom practiced. C. Institutional and Legal Framework3' 2.10 Organization of the Sector. Several ministries, agencies, and organizations are responsible for managing and administering the water resources and environmental policies effecting the water and irrigation sectors in the Republic of Kazakstan. Since 1991, a number of organizational and structural changes have taken place. The Ministry of Reclamation and Water Management was eliminated in 1991 and replaced by the Committee on Water Resources. The Ministry of Ecology and Biological Resources (MOEB) was established in 1992 as the successor to the State Committee on Ecology and Nature Use and the Ministry of Forestry. Other changes may be expected in response to changing demands on the Government. The major institutions of the Government of Kazakstan concerned with the irrigation sector include: 3/ For details, see Annex B, "Overview of Institutional Framework'; Annex R, "MOA Organization'; and Annex T, "MOEB Organization". - 8 - * the Ministry of Agriculture (MOA) which is responsible for the development of agricultural production. The monitoring of drainage, water logging, and soil salinity conditions for the major irrigation projects in the five Southern Oblasts is the responsibility of Hydrologic Amelioration Expeditions under the Minister of Agriculture. * The Ministry of Geology and Protection of Underground Resources (MOG), the key state authority in the field of geological prospecting and protection of the underground resources. * Committee for Water Resources (CWR) which is responsible for maintaining and operating the existing interfarm system for delivery of irrigation and rural drinking water through regional and district water resource committees; supervising eight river basin water management agencies; setting national policies with respect to water quality and administering international river systems with respect to water sharing. * Water Management Design Institutes. There are a number of design institutes in Kazakstan with experience in the planning and design of irrigation and drainage projects including Kazgiprovodkhoz, the former central water management design institute. Most of the regional institutes have now been placed under the administrative control of the Ministry of Agriculture. * Construction Organizations. There are general construction organizations known as industrial unities (ICU) in each of the oblasts. Each region has also facilities for producing prefabricated reinforced concrete structures and metal works. * The Ministry of Ecology and Biological Resources (MOEB), which is a planning, management, and monitoring agency mandated to promote the protection and rational use of natural resources including land resources, soil, water, forests, wildlife and fisheries. * Hydrometeorological Service (Hydromet), the principal authority in the field of hydrometeorology and pollution monitoring. * The Ministry of Construction, Architecture and Housing, responsible for enforcing construction norms and standards. * The Ministry of Health (MOH). The State Sanitary-Epidemiological Service (SanEpid) under the MOH has the responsibility for determining, preventing and mitigating the negative impacts of environmental pollution on human health. * The State Committee on Land Relations and Organization of Land Use (SCLR) is entrusted with developing and implementing unified state policy on land management and ensuring land reform. - 9 - * The Committee on Forestry (CF) is responsible for forest planning, development and management. * The Ministry of Economy is responsible for preparing, approving, and recommending technical projects for government funding. 2.11 Legal Framework. There are a number of environmental codes, common laws, decrees and regulations. Some of these are relevant to environmental, water and agricultural sectors, including: (i) the Law "On Environmental Protection" (June 1991), which establishes state ownership of the natural resources, including, land, water, minerals, forests and wildlife; (ii) the "Water Code" (March 1993) for the purpose of regulating water for domestic, industrial and agricultural use and to ensure meeting environmental requirements; (iii) for a decree "On Land" (December 1995) which elaborates on land ownership and classifies lands depending on the purpose of their use; (iv) the Law "On Land Reform in Kazakstan" (June 1991) which states the objectives and conditions for land reform and its major directions; and (v) the "Forestry Code" (January 1993), which clearly states that forests are the exclusive property of the Republic, but provides for the different forms of forest ownership and establishes different forest categories and liabilities for violation of the code and introduces economic instruments. Many of these laws are now being amended and enforcement has been lacking, especially of the environmental legislation and regulations. D. Water Resources Planning and Management 2. 12 Management. Under the CWR there are nineteen regional committees in each of the oblasts. Under the regional committees there are 96 district water resources committees. Regional level activities and regional staff still receive their funds from the central government. All of the district level operations are now self-supporting. In theory the concept is quite good. However, the process has been introduced too suddenly and in practice funds at the district level are quite limited because of inability and/or unwillingness of water users to pay water charges. 2.13 There are eight river basin organizations (BVOs) covering all areas of the Republic with responsibility for allocating water to enterprises and farms. Each farm has fixed and registered water use limits. During water short periods, water is prorated according to prescribed crop water requirement norms. Higher value cash crops usually have first priority during water short periods. Water delivery and operational plans are prepared each year. Any new area brought under irrigation requires special registration even if the new area will be irrigated from water savings on the farm. 2.14 Government is also interested in privatizing O&M of the inter-farm systems. MOA, with the objective to halt the decline in system maintenance, has requested the Bank to assist with a feasibility study on the establishment of a private irrigation company for a selected typical canal command; it is intended that the company would be wholly owned by the water users (Para. 4.28). - 10 - E. On-Farn Water Management 2.15 On-farm system operation and maintenance is the responsibility of the farm. Previously O&M funds were provided by the State. Because these funds are no longer available, maintenance of on-farm facilities has been neglected. Externally, farm management represented the farm in negotiations with the oblast administration regarding water allocations, investments and O&M, and paid service fees, with or without negotiation. Internally, water management and O&M were generally organized on a brigade level under the direction of the brigade's hydraulic technician, who worked in close collaboration with other members of the brigade technical team. 2.16 A number of the farms that have been privatized have basically retained their original management structure and are able to continue operations, including irrigation practices, according to given rotation programs, using accumulated experience and expertise. Other privatized farms include a number of small units (para. 3.5). Focus group discussions conducted as part of the project social assessment, revealed a common pattern of relative isolation of the small units. Where restructuring has involved the creation of small groups or small independent units, the members who leave the larger unit are generally allocated land at the end of a watercourse, effectively marginalizing them from the large unit, limiting their access to services and making them subject to decisions and actions taken upstream. For such restructured farms, WUAs should be organized in order to provide an institutional bond between all water users that transcends the remnants of the previous management structure and allows for continuity in case of further restructuring. The consultant team working on project preparation is developing pilot programs to create WUAs in some of the restructured farms to be included in the first two years of the project in order to develop an appropriate WUA model for Kazakstan and to propose an efficient, effective program to organize WUAs. F. Financial Issues 2.17 Water pricing was introduced in 1992. The Government is required to deliver water and end users are expected to pay. Because water is considered to be State property, water charges are for services associated with water delivery and supply. Farms are assessed on the basis of scheduled deliveries, with rates based on recovery of O&M costs. Farms are billed based on a volumetric measurement of water used. The CWR sets prices for irrigation water. Setting and collection of water charges for irrigation is done at the District level. Water for industrial use is usually controlled by City Water Channel Authorities. Cost for drinking and industrial water use is determined at the Republic level. Each industry has its own prices. All prices must be approved by the State Monopoly Committee. 2.18 In 1994 of the 17,500 mcm of water allocated for irrigation, 92 percent was used, but only 47 percent (1,195 million tenge) of the water fees were collected. For drinking water only 29 percent (143 million tenge) of the fees were collected. 2.19 For FY 1995 the Committee on Water Resources was allocated 24 million tenge out of the national budget of 175,400 million tenge ( 0.014 percent). Only 40 percent of this money was made available. This budget is required to support Republic staff, oblast staff, BVO office staff, reservoir operations and major river diversion structures. District level operations and interfarm systems are to be covered by user fees. - 11 - 2.20 There are few incentives to reduce water use at this time. However, if an enterprise/farm exceeds its allocated water use, MOEB can fine the enterprise up to 5 times the cost of the amount water used above the allocation. 2.21 The existence of a water charge system to recover O&M costs for the inter-farm system will enhance the potential for recovery of the costs for rehabilitating the inter-farm systems. Unfortunately, the current capacity for beneficiaries to pay for water is limited. As market conditions normalize and farms begin to realize full market value for their crops, this situation should improve. However, during the transition period, some sort of government support program may be required. There is a proposal to use taxation to cover water service charges now pending with the government. G. Environmental Sector Issues 2.22 Current environmental problems and degradation of natural resources in Kazakstan stem mainly from past economic policies and practices in the former Soviet Union (FSU) that promoted quantitative targets set for the economy of the whole country and its different sectors by central planning authorities. These policies were accompanied by pricing policies under which natural resources were undervalued and the environment as a whole was treated as a free good, both by productive sectors and by consumers. In parallel, the lack of sound and realistic environmental policies, legislation, standards and management systems capable of enforcing those regulations and standards, has led over the years to over-use of natural resources and their degradation, as well as to pollution levels with increasingly adverse effects for public health. 2.23 The underlying challenge facing Kazakstan in all aspects of environmentally sustainable development is the need to strengthen substantially the environmental institutions, and the related legal framework, so that they can undertake their mandated tasks. Environmental problems in the sector are caused in general by the following: outdated water and land management policies and practices and lack of integrated pest management (IPM); inadequate technical design, poor construction, operation and maintenance (O&M) of irrigation and drainage systems; institutional deficiencies, including lack of economic and environmental criteria in project selection and development; insufficient staff with experience both in sectoral and environmental agencies; financial constraints preventing adequate O&M of environmental monitoring systems and inadequate staffing to tackle sectoral environmental problems. 2.24 The following problems have been identified as posing constraints on environmentally sustainable agricultural development in Kazakstan: (i) surface and underground water scarcity and uneven seasonal and territorial distribution accompanied by increasing water losses in irrigated agriculture; (ii) surface and underground water pollution by agriculture, including run-off due to past over-application of agro-chemicals; (iii) soil fertility depletion due to poor agricultural practices; (iv) increasing wind and water soil erosion due to reduction of afforestation efforts; (v) waterlogging and salinization of soils due to poor design and construction, reduction in O&M and in some cases non-operation of irrigation and drainage systems; (vi) inadequate enviromnental standards and policies, that are in some cases incompatible with international norms, which in turn are not appropriately implemented, enforced or monitored due to ineffective environmental management and monitoring systems; and (vii) lack of capacity to develop and implement projects in an environmentally sustainable fashion. - 12 - H. Bank Environmental and Water Strategy in Kazakstan 2.25 A key element of the Bank's overall strategy for agriculture in Kazakstan seeks to address environmental concerns, including public sector management capacity in environmental agencies. The Bank's focus is on: (a) preventive measures to avoid adverse environmental impacts, through the use of policy and regulatory measures, environrnental assessments (EAs), environmental planning and economic instruments; and (b) curative measures to address existing problems of water and soil pollution in a cost effective manner. 2.26 The macro-economic and policy reforms currently underway in the country are likely to result in significant environmental benefits, particularly as inefficient and pollution intensive facilities are closed or replaced with cleaner technologies, and price reform leads to more rational and efficient land, water, and agro-chemical inputs use. These reform measures will need to be complemented by appropriate environmental policies and priorities, and an effective environmental institutional and management framework, including environmental standards, monitoring, and economic incentives systems. Once appropriate norms and standards are established, adherence should be adequately enforced and monitored. This will require functional streamlining of the respective environmental agencies and greater transparency of their operation as well as increased public participation. 2.27 While Kazakstan has not yet developed a comprehensive water resources development strategy and management plans, initial steps are being taken by Government within the context of the Bank-supported Aral Sea Basin Program, which involves activities benefitting the Syr Darya basin in Kazakstan, including inter alia, water resources management and environmental studies, improving hydrometeorological services, data bases, information services, and water quality management; and undertaking wetland restoration and capacity building; a preliminary development plan for the Syr Darya basin in Kazakstan has recently been completed under Program 4.4.4' In addition, a number of pilot projects are currently being proposed for implementation as part of Program 3.1 b-', with the objective of testing solutions for water management and salinity problems. The proposed project is complementary to the Aral Sea Program as it would provide an opportunity to identify and demonstrate the use of "good practices" in irrigation and drainage, including water conservation and environmental management, which could be applied elsewhere in the Aral Sea Basin. The project's environmental sub-component would also complement specific assistance being provided to the MOEB under the Technical Assistance Loan, which supports in particular the ministry's legislative, monitoring and enforcement capabilities. 2.28 Kazakstan has not yet developed a comprehensive forest sector development strategy and management plans through initial steps have been undertaken in this direction through the adoption of a new "Forestry Code" and supporting implementation regulations. The project's environmental mitigation measures would include the planting of trees in shelter belts along project area boundaries to retard soil loss and erosion, and improve environmental conditions in the project area. 2.29 The proposed project has been prepared in a manner consistent with the recommendations under the Bank Water Resources Management Policy and the Forest Sector. It will support: (a) strengthening of sector and media institutions involved in environmental management; (b) developing 4/ Syr Darya Control and Delta Development Project 5/ Water Quality Management - Agricultural Water Quality. - 13 - EA capacities; (c) re-enforcing agro-meteorological, water and soil quality monitoring systems and data management; (d) mitigation of existing waterlogging and salinity problems; (e) afforestation efforts to slow soil and wind erosion and degradation of watersheds; and (f) increasing awareness of the role of trees in retaining soil fertility and averting degradation. I. Ten and Five Year Irrigation Investment Plans 2.30 In 1991, "An Integrated Program for the Development of Land Reclamation" (IPLR, Kazgiprovodkhoz, 1991) was completed and approved by the Cabinet of Ministers. The study identified 775,000 ha in 19 oblasts where technical irrigation and reclamation improvements were needed. A Ten- Year Indicative Plan (Harza, Nippon Koei, Kazgiprovodkhoz) was prepared by reviewing and screening the Projects identified in the IPLR. Factors considered in screening projects were economic merit; political factors such as project distribution among oblasts; projects with an identified risk of immediate failure; environmental impact; improved technology; status or potential for privatization; potential for early implementation with emphasis on projects with potential for quick response; and availability of feasibility studies and designs. 2.31 The Ten-Year Plan identified 58 main projects, with 141 irrigation and drainage reconstruction sub-projects covering over 150,000 ha with an estimated cost of US$651 million. Comprehensive reconstruction of irrigation and drainage was proposed on 74,600 ha. Drainage improvements were proposed on 95,500 ha, including 18,500 ha of new drainage. Irrigation improvements were proposed on 62,100 ha. It was estimated that implementation of the Plan would result in an increase in US$63 million in annual net farm income from crop production. 2.32 The projects in the Ten-Year Plan were further evaluated to select a set of projects for possible implementation during the first five years. Feasibility studies were carried out on 34 sub-projects covering 62,000 ha with an estimated cost of US$140 million. From this list of 34 sub-projects, 22 sub- projects in 11 oblasts with a total area of 40,000 ha have been proposed for implementation under the Kazakstan Irrigation and Drainage Improvement Project. The actual number of projects selected for implementation during the first five years will be limited by the availability of international loan funds and the availability of the government's budget to finance local costs. Since the Project has been developed as a program, it will be possible to substitute sub-projects if necessary or add sub-projects as additional funds become available. - 14 - III. THE PROJECT AREA A. General 3.1 The sub-project areas are located throughout Kazakstan in eleven of the nineteen oblasts and cover about 30,000 ha. Most of the work is concentrated in the five Southern oblasts of Almaty, South Kazakstan, Taldy-Korgan, Kzyl Orda and Zhambyl. (IBRD Map 27736). A summary of conditions in the project areas is presented in Annex D. B. Agriculture 3.2 Irrigated farms were almost all large State or Collective farms with irrigation and farm operation facilities scaled to large fields and operated by specialists. Compared with western large farms, the production system is mostly outdated in terms of production technologies, type of farm machinery and management principles. Except for grains, total planted area has declined since 1990, because of the deterioration of irrigation and drainage facilities and the shortage of financing for farm production inputs and new machinery (Table 3.1). Table 3.1: Area Planted to Irrigated Crops (1000 ha) Crop~~~~ 1 9 9/ I Crop 1990 1991 1992 J 19931 Sown Area 1972 2018 1952 1855 Grains & Legumes (peas) 562 600 581 596 Cotton 120 117 109 107 Sugar Beets 44 41 54 49 Oil Seeds - 26 28 30 Potato, Vegetable, Melons 131 114 108 81 Fruits, Berries, Grapes 37 36 38 Fodder, total 1082 1108 1069 984 Source: 1990 data from Kazgiprovodkhoz files. Orgnlsouce and 91-93 data is from GOSKOMS1TAT. 3.3 In terms of crop production, potatoes, vegetables and fodder crops are grown in all oblasts with regular irrigation, of which Almaty, Taldy Korgan and Zhambyl are the main producers. These three oblasts are also the main producers of sugarbeet. Cotton can only be grown in South- Kazakstan, while maize is mainly grown in the four oblasts of Almaty, Taldy Korgan, Zhambyl and Kzyl- Orda. Kzyl-Orda is also the main oblast for rice production and winter cereals. Since the bulk of cereals is grown in the northern "Virgin Lands" under rainfed conditions, it is questionable whether wheat and barley should be grown under irrigation in Kzyl-Orda as well. The problem, however, has been the absence of a functional marketing and distribution system in the country, which encourage local - 15 - government authorities to try to achieve oblast self sufficiency in the production of major food commnodities. 3.4 Yields of most crops in 1993 were 20 percent or more below their level in 1990. The low yields are a consequence of economic disruption of agricultural production resulting in lack of spare parts and (appropriate) machinery, lack of funds to purchase inputs, late payments by the State for past purchases, reduced directed credit from the State with, no alternative sources of credit, distorted price relationships between non subsidized production inputs and controlled prices received for crops and livestock. Table 3.2: Irrigated Crop Yields (100 kg/ha) SI | Crop 1988 1989 1990 1991 1992 1993 % Change 1990-93 Cotton 25 26 27 25 23 21 -22 Wheat 23 25 25 21 21 17 -32 Maize 41 35 34 27 29 30 -12 Rice 41 48 47 44 39 36 -22 All Legumes I 10 11 6 7 7 -36 Oil Crops 14 12 15 8 7 5 -67 Sugar Beets 316 267 260 159 211 152 -42 Potato 118 103 110 109 105 90 -18 Vegetables 177 166 155 127 120 98 -37 Tree Fruit 38 9 46 8 28 10 -77 Grapes 43 23 77 35 35 23 -70 a/ Source: Kazak Inflonation Cen(T GOSOMSAT, Aimaty, March, 1994.- ____ _______ C. Privatization 3.5 As part of the social assessment conducted for this project (see Annex A), managers of 30 of the farms identified for participation in the project were interviewed regarding the privatization status of the farms. Twenty-two of the farms had already been privatized by the end of June 1995, and seven more were privatized by the end of the calendar year. One agricultural research farm, is scheduled to remain under State control, and may therefore be excluded from the project. The current or proposed new structures are as follows: eight joint stock companies; seven collective enterprises; six farmers associations; three comrade associations; and four private enterprises. Nineteen of the 30 farms have - 16 - been restructured - split up into smaller units - to some degree. Most of those have a large unit and a number of small units, individual family farms or small cooperative units; a few have been divided into many small units, primarily in South Kazakstan. All of those that privatized in 1994 or before have restructured somewhat; several of which seem to be undergoing an annual process of redefining both land divisions and management structure. In sum, the situation is very fluid, for the most part tending toward increased restructuring. 3.6 Farm restructuring might be expected to affect the project in at least two ways: it could leave a management void that affects water management, and thus effective use of the investment; and/or restructuring would require additional investment to modify the irrigation system to accommodate smaller turnout areas. Although all of the farms still maintain an umbrella management entity that could continue to be responsible for operation and maintenance of the on-farm works, it is clear that small break-away units are given low priority by farm management (para. 2.16). Water User Associations can fill this management void. Restructuring is not expected to require additional on-farm investments, as the design of existing systems appears to be flexible enough, and turnout areas are small enough to accommodate restructuring. D. Socio-Economic Status 3.7 The people on the farms proposed for the project include a broad cross-section of Kazak rural people whose situation mirrors the general economic situation in the country. They are troubled by the collapse of the economy, reflected in their failure to receive wages; they understand the dissolution of old trading arrangements, which results in the lack of spare parts for machinery and other shortages; and they suffer from the absence of markets in a nascent market economy. Farms that grow specialized crops, such as onions or vegetables near urban centers are faring well because they already have established private market ties that they can continue to develop. Grain farms are in a somewhat more precarious situation since state domination of the grain trade has subsided more slowly which has retarded the emergence of private marketing channels. However, 1995 may have marked a turn around in the development of a multi-channel market system, as state involvement in marketing was dramatically reduced and active private trade quickly began to emerge. In either case, however, an important challenge of privatization is for farms to balance the need to be financially viable with the need to protect soil resources by adhering to the crop rotation system developed for each farm and religiously maintained until the present. - 17 - IV. THE PROJECT A. Background 4.1 Substantial investments were made during the Soviet era in the irrigation and drainage infrastructure, dramatically expanding irrigated area. These systems have deteriorated due in part to poor design and construction, but also to inadequate maintenance and failure to complete required drainage systems. This deterioration has increasingly led to water logging and salinity, and reduced yields. The situation has been exacerbated by environmental problems, including inefficient water management, water pollution and declining soil fertility. Current environmental standards and policies are inadequate and the environmental management systems are not able to control the situation. 4.2 In 1991, an Integrated Program for the Development of Land Reclamation (IPLR) was completed and approved by the Cabinet of Ministers. The program identified 775,000 ha in 1,300 projects located in 19 oblasts where irrigation and drainage improvements were needed. In October 1992, a Bank identification mission visited Kazakstan and the Government expressed interest in Bank financing for this program. Project preparation was undertaken from January 1994 through June 1995 with support of a Japanese PHRD Grant. Ten and Five Year Investment Plans were prepared. Project preparation was continued in September 1995 under a "bridging operation" with financing from an advance of the Project Preparation Facility (PPF). B. Project Objectives and Rationale for Bank's Involvement 4.3 The rehabilitation of the irrigation and drainage infrastructure and improving its management, as well as enhancing the environment are key elements in the Bank's strategy to promote sustainable irrigated agriculture (paras. 1.13 and 2.29). The project's main objectives would be to: (i) promote sustainable irrigated agricultural production through irrigation and drainage rehabilitation, improved water management, and better operation and maintenance; (ii) introduce improved agricultural practices and farmers' information services; and (iii) strengthen irrigation and environmental agencies. 4.4 More specifically, the Bank's involvement in the project would: (i) include economic and environmental selection criteria in long term irrigation investment planning; (ii) introduce higher technical standards and new technologies/procedures in planning, design, construction (particularly quality control), environmental protection and procurement; (iii) start, as a pilot program, farmers' participatory training and farmers' information services to provide information on general farm management, improved production packages, and better water management; (iv) support privatization by establishing eligibility criteria for participating farms and improving the skill levels of recently established and prospective independent farms; (v) strengthen MOA's project implementation capacity and strengthen MOA's, MOEB's and other concerned agencies' environmental, technical and management capacity; (vi) expose the local design institutes and the local construction industry to new technologies and better practices; (vii) assist in the establishment of Water Users Associations (WUAs) for O&M within the newly privatized farms; (viii) introduce farmers' participation in project design and implementation; and (ix) improve O&M of the inter-farm systems through increased collection of water charges. C. Project Selection Criteria 4.5 The criteria agreed with MOA for the inclusion of sub-projects in the investment program are shown in Annex F. Most importantly, the sub-projects would only take place on the privatized - 18 - successors to state farms and would aim at rehabilitating presently irrigated areas and/or land previously irrigated but now abandoned. The feasibility study would be undertaken for each sub-project to establish its economic and financial viability (economic and financial rate of returns should exceed 12 percent). Participating farms would sign appropriate letters of agreement with MOA to repay investment costs through a per hectare cost recovery fee. D. Main Components 4.6 The project would support a six year irrigation and drainage investment program. It has been appraised on the basis of feasibility studies for about 34 sub-projects prepared by MOA with the assistance of foreign and local consultants. Out of these 34 sub-projects, a core program of nine sub- projects has been identified for construction starts in Year One (1996/1997) and Two (1997/1998) of the implementation program. Two other sub-projects (Saryozenski and Kranaya Polyana) have only recently been proposed for Year Two implementation. These two sub-projects, together with the sub-projects to be selected for Year Three from a list of 13 "reserve projects" or from other potential sub-projects, would still need to be prepared and approved by the Bank for implementation. Main components of the project would be: (a) Improving reliability and efficiency of irrigation water use, involving irrigation rehabilitation and installation of sprinkler systems; and reducing waterlogging and salinity, involving rehabilitation of collector drains and on- farm drainage improvements; the project works would include predominantly on-farm system rehabilitation (about 30,000 ha) as well as selected improvements in inter-farm irrigation and drainage; (b) Promoting agricultural development of privatized farms through a pilot operation aimed at providing farmers' training, demonstrations and information services; and (c) Institution building, including: (i) support for the Project Implementation Unit (PIU) in the MOA; and (ii) strengthening the environmental and monitoring capabilities of the MOA, the MOEB and other concerned agencies; undertaking a study of feasibility of transferring of inter-farm irrigation management from the public sector to the water users. E. Detailed Features Component 1: Rehabilitation of Irrigation and Drainage Systems (Base Cost US$ 78.3 million)#' 4.7 General. The rehabilitation works would be undertaken in three groups of sub-projects, averaging about 10,000 ha of on-farm systems and/or inter-farm irrigation and drainage systems. Individual sub-projects may involve either (i) Comprehensive Reconstruction of Irrigation Systems (CROIS), including irrigation and drainage; (ii) reconstruction of on-farm drainage only; or (iii) either related or self-standing inter-farm irrigation or drainage improvements. On-farm irrigation may include 6/ For details see Annex G, "Project Summary Table"; Annex H, "Summary Project Works': and Annex 1, "Description of Sub- Projects for Years One and Two." - 19 - either surface irrigation or sprinkler irrigation. On-farm drainage works consist of either surface, tile or vertical drainage. 4.8 Year One (1996/97). The 6 sub-projects identified for implementation starts in Year One comprise 10 km of inter-farm canals; 6,500 ha of on-farm irrigation improvements and 10,300 ha of on- farm drainage, including 1,400 of tile drainage and about 7,800 ha of vertical drainage. (base cost about US$26 Million). 4.9 Year Two (1997/98). The 3 sub-projects currently under preparation for implementation starts in Year Two comprise 2,100 ha of on-farm irrigation improvements and 5,500 ha of on-farm drainage improvements, including 4,900 ha of tile drainage and 600 ha of vertical drainage. (base cost about US$17 Million).7' 4.10 Year Three (1998/1999). Sub-projects to start in Year Three would be selected from the list of 13 "reserve projects" or, if needed, from among other potential sub-projects (base costs about US$26 million). 4.11 On-farm irrigation systems. Two basic types of on-farm irrigation projects are being proposed; those to be rehabilitated as surface furrow systems; and those to be reconstructed as pivot sprinkler irrigation systems. The surface systems generally involve replacing the open earth canal delivery system with a lined or closed pipe system, providing outlets down to 15 ha farm blocks. The surface systems are, in most cases, designed for use with movable hose. Major elements of the sprinkler systems include replacement of the delivery system with a closed pipe distribution system, and installation of a mobile or stationary pump station where required. The center pivot system would service an average of 50 ha. The works include provision of slide gates, pipe valves, water meters in pipes, broad-crested long measuring flumes, pressure relief regulation valves, and check valves. Other infrastructure reconstruction such as roads and power lines are provided as needed. Demonstrations in water management (para. 4.18) would contribute to improving on-farm water use efficiencies. 4.12 An economic and technical evaluation was carried out for each irrigation reconstruction project to determine irrigation type. In general sprinkler irrigation was proposed where sub-surface closed drainage was required, land leveling was needed, in water short areas, and in sub-projects where sprinkler systems are currently used. The farms will make the final choice regarding the type of sprinkler system that will be purchased for their farm. 4.13 On-farm drainage systems. In general on-farm sub-surface drainage will be provided for areas where the water table is less than 2 meters from the surface. Drain depth will be set at 2 m and plastic pipe will be used for all sub-surface drains. Vertical drainage was selected for use in Maktara District (Golodnya Steppe) and involves a total of 70 drainage wells (about 7,800 ha). 4.14 One of the most critical components of a successful drainage scheme is a proper outlet. Special attention was given to the question of drain outlets during the preparation of the feasibility designs. The GOK has a strict policy of limiting the discharge of drainage water into a receiving body that has a higher water quality than the discharging flow. A number of alternative procedures have been used in the past to conform to this regulation. Many drainage systems have had their flows diverted into specially constructed evaporation ponds or are conveyed large distances to natural depressions or salted 7/ Base cost estimates include provisional figures for Saryozenski and Kranaya Polyana sub-projects. - 20 - lakes. It will be necessary to review the drainage outlet alternatives in more detail during the design phase. Special water balance and water quality studies will be required for several of the larger projects. Component 2: Promoting Agricultural Development on Privatized Farms (Base Cost US$1.9 million)8' 4.15 Pilots for Farmers' Participatory Training and Information Services. Most members of the project farms, at least at this time, appear to prefer to be part of a functional group within their large farm unit and work under the aegis of the former State/Collective Farm management and specialists, rather than to take the risk of being the owner of a smaller private farm. These functional groups may be a former production brigade of 60 - 80 people, working on 450 to 500 ha, or smaller family groups or teams. The groups are responsible for either on-farm water management, crop production or one of the farm services, such as water delivery, maintaining a pool of farm machinery or dairy production. However, the overall responsibility for water management and services still remains with centralized farms management and specialists. 4. 16 The main reasons for the reluctance of the shareholders to restructure the larger farms into smaller units include: (i) lack of overall farm management skills; (ii) lack of operating capital and access to agricultural credit; (iii) poorly developed marketing and input supply mechanisms; and (iv) limited availability of inputs, spare parts, and equipment. The project will address the first issue through a pilot operation to capitalize on the potential for increased agricultural production created by the investments in irrigation and drainage. The pilot focuses on informing farmers on commercial farm management principles, the use of more efficient production and water management practices and options for privatization. 4.17 Effective research, extension and agricultural information services do not exist for private farmers in Kazakstan. Agricultural training takes place in the higher educational centers at universities while specialist advice, mainly in the form of directives, usually comes from agricultural research institutes. Therefore, a number of practical, client-oriented, short participatory training courses or workshops will be prepared and conducted under the project at selected project farms or training centers for government officials, farm managers and directors, production specialists and farmers' groups and individual private farmers. Topics for training will include modern farm and business management practices, new crop production technologies, improved on-farm water management, marketing and processing of produce, and environmental topics. 4.18 Together with the training, relevant demonstrations on improved on-farm water management (types of irrigation and drainage) and new crop production technologies will be conducted to show farm managers and (future) farmers how to increase efficiency of applied inputs, the use of more efficient farm machinery and tractors and how to intensify crop production. 4. 19 To further support the participating farms and other irrigated farms not included in the project, a "Farmers' Information Services Desk" will be established in MOA to provide technical pamphlets, videos and other materials on critical agricultural issues related to farm management, production and marketing. Most information will be disseminated in Russian and Kazak through the existing TV and Radio channels by MOA's Press Center and through two "Farmers' Weekly" papers. 8/ For details, see Annex J, "Agricultural Development". - 21 - 4.20 Farm Restructuring. The project will support the privatization process and promote restructuring, as appropriate and desired by farmers, in four principal ways: by developing and refining a strong participatory process in design and implementation, the project will contribute to the empowerment of farm members; by providing access to information and management skills, it will encourage entrepreneurial farmers to take the risks associated with creating and managing new farm units; by creating Water User Associations in conjunction with restructuring, it will provide an institutional mechanism to operate and maintain the system and assure equitable access to water by all farmers; finally, by discouraging concentrated ownership of farms, the project will help preserve the universe of choice during this difficult transition period. Each of these elements is discussed in the following paragraphs. 4.21 The project incorporates a multi-step consultation process in the design and implementation of sub-projects. This will engage both farmers and managers in making decisions and assuming responsibility for farm assets to be affected by the project. This iterative consultation process will broaden the prevailing concept of farm management and will contribute significantly, although somewhat indirectly, to making further steps in the privatization process more open, more transparent, and more informed. 4.22 One reason that farmers are still reluctant to break away from new collective or corporate farms is a lack of management skills that would enable them to operate new farms. Management of new restructured units is important for the project, as it will affect the potential for increasing agricultural production that is created by the project. The project will develop a number of practical training courses on production and management issues, demonstrations of improved water management and production technologies and create broader information dissemination mechanisms (see paras. 4.17 - 4.19). This management training component will support privatization very concretely by assisting new family and small cooperative farms to establish themselves, as well as prompt larger units to consider restructuring. 4.23 As farms restructure, water user associations will be created to fill institutional gaps that give break-away units inadequate access to water. Appropriate models for Kazakstan will be developed under the PPF that build on and strengthen existing community bonds. The project will then launch pilot efforts on farms already restructured to test and refine the models. Depending on the outcome of a pilot effort to create an autonomous water district that is responsible for water management from the diversion to the farmgate, the project may promote widespread adoption of this concept as a way of decentralizing authority and responsibly for water resource management to an operational level. 4.24 On some farms, farm managers and technicians are attempting to acquire land use right certificates from farm members to create large commercial farm units, encompassing either a whole former state farm or the equivalent of a brigade unit. Currently, other farm members are vulnerable to pressure to cede their use rights due to great uncertainties. To preserve the future choices of vulnerable farmers, the project will exclude farms that restrict the ability of farm members to cede their land share from the principal unit and start new farm units. Assurances were obtained during loan negotiations that the eligibility criteria for participation in the project would require that the bylaws of each farm participating in the project would guarantee the right of individuals and groups to withdraw their shares from the collective or corporate entity and establish their own independent farms. - 22 - Component 3: Institution Building (Base Cost US$5.0 million)9' 4.25 Support for the Project Implementation Unit (PIU) (Base Cost US$ 2.2 million). The project would upgrade the institutional capacity of the MOA in planning, preparing, executing and monitoring an irrigation and drainage investment program. For that purpose, a PIU was established in July 1995, under the direct supervision of the Minister of Agriculture. PIU staff, including Resident Engineers for construction supervision, would be recruited on a competitive basis and financed (base cost US$0.9 million) under the project. 4.26 The PIU would contract management and engineering consultants to (i) assist and train PIU staff in project planning, management, monitoring, procurement and financial management; (ii) take responsibility for updating/preparing feasibility studies, preparing Environmental Impact Assessments (EIAs), undertaking field surveys and designs, preparing bidding documents; and (iii) assist PIU with farmers' participation, establishing WUAs and construction supervision. It is expected that the management and engineering consultants will work with national design institutes as partner(s) in a joint venture or as sub-contractors. The main consultant would provide training to staff of the local design institutes in, inter alia, construction supervision and quality control. These arrangements would strengthen the local consulting industry, as well as introduce it to better engineering standards and business practices. It is expected that the consultants' contract would involve some 175 person-months of expatriate staff and about 5,000 person-months of local experts and support staff. During Negotiations it was agreed that the need for further consulting services would be examined during the mid-term review (para. 5.30) and funds would be reallocated if such a need would arise. 4.27 Strengthening Environmental Capacity (Base Cost US$2.6 million)'. This sub- component would include: (a) Institutional Development and Training (Cost US$855,000), involving: a. I Institutional Development (Cost US$250,000), including preparation of an improved Environmental Assessment (EA) regulatory framework for irrigation/drainage development; preparation of an EIA manual for irrigation/drainage projects; and building environmental capacity in MOA through the creation of an Environmental Unit. a.2 EIA Preparation and State Ecological Expertise (SEE) Review (US$150,000), including preparation of remaining project specific ElAs and SEE Review as required by national environmental legislation and governmental regulations. a.3 Training (US$370,000) for managers, irrigation/drainage engineers, environmental staff, and farmers. A supporting information program would be developed that may include television spots, preparation of brochures, guides, leaflets, bulletins, video and radio programs, etc. 9! Excluding costs for engineering and construction supervision, which are included in Component 1. 10/ See Annex K for details. - 23 - a.4 An EA Harmonization Seminar (Cost US$85,000) to reconcile differences in Bank and Kazak EA requirements and procedures and foster EA preparation for project processing in various sectors; (b) Strengthening Water/Soil Quality, Monitoring and Pollution Control, Agro-meteorological Programu and Provision of Equipment and Materials (Cost US$970,000), including provision of field and laboratory monitoring equipment, computers for data processing and management, vehicles, office equipment, spare parts and chemicals for laboratory analysis; monitoring of soil contamination, drainage, surface and ground water quality, water table and salinity; strengthening existing agro-meteorological data collection systems; measuring water losses in irrigation/drainage systems; and supporting monitoring of pesticide residues and quality control of agricultural inputs/outputs; (c) Special Environmental Studies (US$150,000), including development of cost-effective methods to prevent salinity and water-logging, methods for the reclamation of saline soil or introduction of alternative land use; and (d) Developing and Implementing Mitigation Plans (US$625,000), including a pilot project to clean drainage water from agro-chemical residues; and afforestation within the boundaries of the sub-project areas. 4.28 Study of the Feasibility of Privatizing Irrigation Management for a Typical Canal Command Area (US$230,000). Funds would be provided under the loan for a study to examine the feasibility of establishing a private irrigation company for the area served by the Tashatkul canal (approximately 40,000 ha) in Dzambul Oblast. MOA is concerned about the sustainability of the inter- farm systems because of insufficient funding of O&M and sees user participation and privatization as a means to improve system O&M. It is envisaged that the company would be owned by the water users, be fully responsible for operation and maintenance and financially self-sufficient. The study would define the desired services to be provided by the company, the costs for providing these services, financial arrangements and the process of establishing the company and transferring to it management of the system. The study would specifically consider issues of jurisdiction, ownership, organizational structure of the new management, the need for technological improvements in operation and maintenance to facilitate the transfer process, and training needs, among others. F. Implementation Schedule 4.29 The project is to be implemented over a period of six years. A summary of the implementation schedule is shown in Annex L. The IDIP has been designed as an irrigation development program. Individual sub-projects can be added or removed from the program based on the willingness of beneficiaries to participate, ability of beneficiaries to pay for the on-farm reconstruction costs, and economic viability, technical feasibility, and environmental acceptability of each sub-project. Construction periods for individual sub-projects are expected to be about two to three years, depending upon the size of the project. - 24 - G. Project Costs 4.30 The proposed project is estimated to cost about US$118 million. This estimate is based on December 1995 prices, but with the addition of taxes and physical and price contingencies. The foreign exchange component is estimated at about US$49 million or about 42 percent of total project cost. Physical contingencies were assumed at 10 percent of the investment costs. Price contingency estimates assume an increase in local currency costs of 15 per cent per annum starting in 1997 (based on expected local inflation) and in foreign exchange of 1.8 percent for 1996, 2.7 percent for 1997. 2.5 percent for 1998, 2.5 percent for 1999, 2.6 percent for 2000, and 2.7 percent for 2001 and 2002. Physical and price contingencies combined comprise 32 percent of the project base cost. Import duties, and value added tax amount to about 17 percent of the base cost.'L' The costs for on-farm irrigation works with surface irrigation are about US$1,400/ha, and with sprinkler irrigation US$ 2,600/ha. The costs for horizontal sub-surface drainage are about US$1,440/ha, and for vertical drainage US$600/ha. Project costs are summarized in Table 4.1 and details are presented in Annex M. Table 4.1: Components Project Cost Summary (US$ Million) % Foreign % Total Exchange Base Costs Local Foreign Total A. Irrigation and Drainage Rehabilitation 42.49 35.80 78.29 46 90 B. Promoting Agricultural Development 0.81 1.12 1.93 58 2 C. Institutional Building Implementation Support (PIU) 0.79 1.36 2.15 63 2 Environmental Support and Monitoring 1.44 1.15 2.58 44 3 Pilot for Irrigation Management Transfer 0.08 0.16 0.23 67 - Sub-total Institution Building 2.31 2.66 4.96 54 6 D. Refinancing PPF 0.38 1.13 1.50 75 2 TOTAL BASELINE COSTS 45.98 40.71 86.69 47 100 Physical Contingencies 4.40 3.58 7.98 45 9 Prce Contingencies 18.46 4.72 23.17 20 27 TOTAL PROJECT COSTS 68.84 49.01 117.84 42 136 H. Financing Plan 4.31 A loan of US$80 million equivalent to the Republic of Kazakstan is proposed, to finance 80 percent of total costs net of taxes. This would cover 100 percent of foreign costs and 61 percent of local costs net of taxes and duties. The Borrower would contribute about US$20 million equivalent or about 20 percent of total project cost (net of taxes). The costs of on-farm rehabilitation works would eventually be repaid by participating farms through a cost recovery fee (para. 5.23). In August 1995, the Bank approved an advance from the Project Preparation Facility (PPF); this advance will be repaid under the loan. The financing plan for the project is presented in Table 4.2. H/ The treatment of taxes in the cost tables is based on existing tax legislation. The Bank has just leamt that revisions to the legislation are being proposed so that project costs financed by multi-lateral lenders including the World Hank will be exempt from custom duties and VAT taxes. - 25 - Table 4.2: Financing Plan Millions of US$ l Item Local Foreign Total IBRD 30.99 49.01 80.00 Government'2' 37.84 0 37.84 Total Project Costs 68.83 49.01 117.84 4.32 Counterpart Funds. Project implementation according to plan requires the timely availability of budgetary resources to finance local costs. Assurances were obtained during loan negotiations that. (i) the Government would introduce, beginning in FY97, a line item in the annual draft budget for the project until its completion, for the sole use of the project, and in an amount to be agreed with the Bank; (ii) Government would provide sufficient funds in its annual budgets to cover routine environmental monitoring activities by MOA, MOEB, MOG, Hydromet, and SANEPID in the sub-project areas; and (iii) an annual review would be undertaken by the Government and the Bank of Government's investment program in irrigation to assure that only priority investments are undertaken and that planned investments would not threaten counterpart funding levels for the proposed project. I. Procurement 4.33 Procurement of goods and works would follow the "Guidelines: Procurement under IBRD Loans and IDA Credits, January 1995" revised in January 1996. Recruitment of consultants would follow the "Guidelines: Use of Consultants by World Bank Borrower and by The World Bank as Executing Agency, August 1981." The Borrower will use Bank's standard bidding documents for goods and works, including the Bank's Regional sample NCB documents for works issued in 1995. For consulting assignments the Borrower will use the relevant Bank's standard form of contract. A General Procurement Notice would be issued in Development Business in June 1996, followed by individual specific notices for contracts above US$10 million. The Project Launch Workshop is planned for September 1996. 4.34 Responsibility for all procurement will rest with the PIU of the MOA. The staff of the PIU will include a full time procurement specialist. Moreover, the PIU will be assisted by a consulting firm (paras. 4.36(c) and 5.6), which will provide a full time procurement specialist for at least the first year of project implementation. 4.35 There are civil works construction organizations and plants for the fabrication of concrete pipes and irrigation structures in nearly all oblasts. During the Soviet era these organizations had considerable construction and manufacturing capabilities. Therefore, there should be no major problem for most of them to implement the relatively small sub-projects anticipated for implementation under the project. All these former state organizations have recently been privatized and converted into joint stock 12/ Including US$17.8 million of taxes and duties. - 26 - companies; they have financial and managerial autonomy, do not receive subsidies from Government and, therefore, meet the eligibility criteria of the Bank's operational directives. 4.36 Procurement arrangements are summarized in Table 4.3. Details of the proposed arrangements are as follows-3: (a) Works. The project would consist of some 15 sub-projects which will require civil works construction and the supply and installment of various types of materials and equipment. To simplify procurement arrangements, the bidding for the sub-projects will require general contractors to procure, supply and install all necessary equipment. Contracts over US$0.5 million would be procured through ICB. Based on the currently available list of "reserve projects" (para. 4.6), it is expected that other smaller valued contracts below US$500,000 each would be procured through NCB up to an aggregate amount of US$2.0 million. Works estimated to cost less than $100,000 per contract and up to a maximum aggregate amount of US$500,000 may be procured under lump sum, fixed price contracts awarded on the basis of quotations from three qualified domestic contractors in response to a written invitation; (b) Goods: (i) ICB (US$1.3 million) procedures would be used for contracts of US$200,000 and above; (ii) International Shopping (IS) would be used to procure items included in contract packages estimated to cost under US$200,000 each (with an aggregate value not exceeding US$3.0 million), such as vehicles, field and office equipment, etc. IS shall be based on quotations from at least three suppliers in two different countries; and (iii) National ShopDing (NS) would be used for small items or items that can be obtained off- the shelf, and for national services (printed materials and video/TV productions) estimated to cost less than US$50,000 per contract, up to an aggregate amount of US$2.0 million on the basis of at least three quotations from qualified suppliers. 13/ See also Annex N, 'Procurement Plan". - 27 - Table 4.3: Summary of Proposed Procurenment Arrangements (US$ millon equivalent)" ICB NCB Other NBF Total A. Works 95.98 3.02 -- -- 98.99 (60.88) (2.00) (62.88) B. Goods Equipment & Machinery 1.29 -- -- -- 1.29 (1.07) (1.07) Materials -- -- 0.702/ -- 0.70 (0.59) (0.59) Field & Office Equip. & -- -- 1.573' -- 1.57 vehicles (1.31) (1.31) C. Consultancies4' Engineering & Supervision -- -- 7.97 -- 7.97 (7.97) (7.97) Technical Assistance -- -- 3.96 -- 3.96 (3.96) (3.96) Training -- -- 0.72 -- 0.72 (0.72) (0.72) D. Miscellaneous Refining PPF -- -- 1.50 -- 1.50 (1.50) (1.50) PIU Operation -- -- 1.13 1.13 (0.00) (0.00) Total 97.27 3.02 16.44 1.13 117.84 (61.95) (2.00) (16.06) (0.00) (80.00) 1/ Figures in parentheses are the respective amounts financed by IBRD; minor discrepancies due to rounding up of numbers. 2/ National Shopping (USS0.7 million) for agricultural inputs, printed materials and materials/services for video/TV productions. 3/ International Shopping (USSI.50 million) for vehicles, office equipment, environmental monitoring equipment, and equipment for the Clean Water Pilot: National Shopping (US$0.07 million) for training equipment and equipment for farmers' information services. 4/ Consultancies, including training (US$12.65 million) procured according to standard Bank guidelines for procurement of consultant services. - 28 - (c) Consultants. The following consultants and staff would be recruited by the PIU: (i) through short-listing a consulting firm to assist, inter alia, with project planning, management, procurement, and construction supervision and monitoring; and to take responsibility for project design, preparation of bidding documents, and undertaking environmental impact assessments (EIAs) (para. 4.30); value of first contract (for three years) US$7.7 million; (ii) through short- listing, a consulting firm, to assist, inter alia, with the pilots for farmers' training and information services; (paras. 4.15 to 4.19); All training activities are an integral part of the consultant services' contract and its scope, program and budget would need to be approved by the Bank. Contract value US$1.5 million; (iii) through short-listing, a consulting firm to assist with strengthening the environmental capacity of MOA, MOEB and other agencies (para. 4.30); contract value US$1.2 million; and (iv) staff for the PIU, selected on the basis of job descriptions and a selection process approved by the Bank (total costs about US$1.0 million). About 12 local, highly qualified individuals would be recruited (initially for one year, with the possibility of extension upon satisfactory performance) to staff the PIU and to represent the MOA as the client and the main executing agency vis-a-vis other governmental agencies and participating farms, and foreign and local consulting firms, and contractors; these individuals will cover all required main disciplines, including engineering, procurement, agriculture, the environment, cost recovery, farmers' participation, office management, accounting and monitoring and evaluation. In addition Resident Engineers (one for each sub-project) would be recruited by the PIU to take charge of construction supervision. 4.37 Bank Review. All ICB contracts (both goods and works) would be subject to prior Bank review, as well as the first works contract following: (i) NCB; and (ii) fixed price contract awarded on the basis of three quotations. Also, the letters of invitation for all consulting assignments (including the terms of reference) and contracts with consulting firms costing more than US$100,000, as well as sole source selection, and contracts with individual consultants costing more than US$50,000 would be subject to prior review by the Bank. All other contracts would be subject to ex-post review by the Bank on a random basis. Agreement was reached during loan negotiations that all procurement processes and actions under the project would follow the procedures outlined in paras. 4.36 to 4.37. 4.38 A Country Procurement Assessment Report (CPAR) has not yet been completed. However, procurement proposed under the project would follow Bank Procurement Guidelines. 4.39 Information regarding procurement administration would be collected and recorded by the PIU and quarterly reports would be sent to the Bank. These reports would also indicate: (a) revised cost estimates for individual contracts and the total project; (b) revised timing of procurement actions and completion time; and (c) compliance with aggregate limits on specified methods of procurement. - 29 - J. Disbursements 4.40 The proposed Bank loan of US$80 million equivalent would be disbursed over a period of 6 years, and the expected project closing date would be December 31, 2003. There is no experience yet to form a disbursement profile for Kazakstan, but it is estimated that the country's ability to implement the project over a six-year period is reasonable, especially given that a PIU has already been set up. The estimated disbursements during each year of project implementation are shown in Annex 0. 4.41 The proceeds of the loan would be disbursed in US Dollars as shown in Table 4.4 below: Table 4.4: Disbursement Categories Disbursement Category Allocation Disbursement Basis ______________________j(US$ M) 1. Goods: Equipment and Materials 3.5 100 percent of foreign expenditure 100 percent of local expenditures (ex-factory cost) and 85 percent of local expenditures for other items procured locally 2. Works 60.4 70 percent of expenditures 3. Consultant Services 11.6 100 percent 4. Refund of Project Prep Advance 1.5 5. Unallocated 3.0 Total 80.0 4.42 Direct payment procedures from the Bank to suppliers will be used. Disbursements against the categories described in Table 4.4 would be made upon receipt by the Bank of fully documented applications, except for: (i) contracts for works valued at less than US$500,000; (ii) contracts with consulting firms valued at less then US$100,0QO; and (iii) contracts with individual consultants valued at less than US$50,000; contracts for goods costing less than $200,000; disbursements for these items would be made against certified Statements of Expenditures (SOEs). Supporting documentation for SOE would be retained by the Borrower and made available to the Bank during supervision. Direct payment application and applications for special comrnitments would be accepted for minimum amounts of US$20,000. To facilitate project implementation, the Borrower would establish a Special Account in one of the major commercial banks to cover the Bank's share of expenditures. An initial deposit of US$500,000 would be made, with the amount in the Special Account increased to the ceiling of US$1.0 million when total disbursements reach US$2.0 million. Applications for replenishment of the Special Account would be submitted monthly or when one-third of the amount has been withdrawn, whichever occurs earlier. Documentation requirements for replenishment would follow the same procedure as described above. In addition, monthly bank statements of the Special Account which have been reconciled by the Borrower would accompany all replenishment requests. At negotiations, agreement was reached that disbursement arrangements will follow the procedures described above, including the establishment and operation of the Special Account. A condition for disbursement of expenditures made in respect of Category (2), would be that each sub-project in respect of which disbursement is sought would be selected, approved and implemented in accordance with the procedures and eligibility criteria, - 30 - and on ternms and conditions specified in the cost recovery resolution, and in schedule 7 of the loan agreement, and satisfactory to the Bank. The Bank will make its decision to finance a sub-project after reviewing the feasibility study, the EIA and the SEE review. K. Status of Project Preparation 4.43 The project has been based on the economic and environmental screening of 141 sub- projects in 19 oblasts and which had been included in the Ten Year and Five Year Irrigation Investment Plans (paras. 2.30 - 2.31). Feasibility studies have been prepared for 34 sub-projects initially selected for inclusion in the Five Year Investment Plan, including 9 core projects currently proposed for implementation under the IDIP and the 13 "reserve projects" (para. 4.6). Under the "bridging operation" (para. 4.2) the PIU has been set up and staffed and the referred to feasibility studies will be updated for sub-projects scheduled with implementation starts in the first year, and EIAs/SEEs for these sub-projects will be prepared. Detailed designs and bidding documents for the Year One sub-projects are scheduled for completion by July 1996. In addition, a Sector Environmental Analysis (SEA) and two draft sub- project specific pilot Environmental Impact Assessments (ElAs) have been prepared; the latter will also be finalized during the" bridging operation" (See Annex X for a summary of the SEA). A social assessment of 30 farms identified for participation in the project was also undertaken. L. Participation 4.44 Major project stakeholders include the MOA and the CWR and their representatives on different administrative levels, design institutes, contractors, farm managers, farm members and individual farmers. The project will fund works that originally were included in a long-term irrigation and drainage improvement program, most elements of which were incorporated at the initiation of managers of former state and collective farms, or at least with their active involvement. With the advent of privatization, farm members and independent farmers located on the former state farms have become important stakeholders, as they will ultimately be responsible for repayment of the cost of on-farm works. The project will actively engage these stakeholders through a transparent 5-step consultation and decision making process (Annex P) which will ensure that they are empowered to make important decisions at each step in the design and implementation process and that they are clearly aware of the cost and O&M implications of the decisions. The project will also promote two other mechanisms to ensure that the voices of major stakeholders are factored into decisions and operations. First, given the experience of independent farmers being marginalized from farm services, including water, Water User Associations (WUAs) will be promoted to ensure that independent farmers have a voice in water management. WUA models appropriate for Kazakstan will be developed in early stages of the project. Second, on a pilot basis, the project will help prepare a private Irrigation Company at the canal command level, based roughly on a U.S. irrigation district model, to manage inter-farm water sources, thus decentralizing water administration and increasing the voice of local farmers and farm managers in water allocation decisions and inter-farm water management. - 31 - M. Enviromnental Aspects and Impacts 4.45 In accordance and consistent with the requirements of the Bank OD 4.01 "Environmental Assessment", the project has been screened and placed into EA Category "B", which requires the preparation of an environmental analysis to define environmental management, monitoring and mitigation measures as necessary. However, in accordance with Kazak law ElAs should be prepared, and SEE reviews conducted for each sub-project. Assurances were obtainedfrom Government at negotiations that (i) the proceduresfor selection of sub-projects would include (i) the preparation of EUAs and SEE reviews for sub-projects would be conducted within theframework of the recommendations of the SEA and the two pilot ElAs, and in accordance with the Bank's and Government's EA requirements and procedures. Assurances were also obtained at negotiations that: (i) recommended mitigation measures in the ElAs and SEE reviews would become an integral part of project design and implementation; (ii) "chance find" procedures would be developed and applied to address the risk of encountering unknown archaeological sites and used in accordance with the guidelines and requirements of Kazakstan acceptable to the Bank; and (iii) all agrochemicals to be applied under the project would be approved, stored, distributed and used in accordance with the guidelines and requirements of Kazakstan acceptable to the Bank. 4.46 The project has been subject to field-based environmental review that indicates its positive impact on the environment. The project would not expand irrigation to new areas but would improve irrigation technology on existing agricultural land, leading to improved water conservation and agricultural practices. The proposed drainage improvements on these lands would reduce present and potential waterlogging and salinity problems. The project would have an additional positive environmental impact by reducing water losses through improved system conveyance and flow control. Pesticide runoff would also be reduced through disseminating information to farmers and training on the safe use of pesticides, following Bank requirements on techniques for IPM, thus, in turn, reducing water pollution and soil contamination. Adverse impacts will be mainly limited to the construction phase but remedial measures will be taken (para. 5.20). The proposed project would not involve involuntary resettlement and is not anticipated to have an impact on known archaeological or historical sites in any of the sub-projects areas. N. International Waterways 4.47 The investment program under proposed project could affect the rivers that are international waterways in accordance with OP 7.50, para. 1 (a) and (b), i.e., rivers and tributaries that ultimately flow to and/or are shared with other riparian countries. However, a notification for the activities under the project is not required since: (a) the proposed works are limited to the rehabilitation of existing schemes. The proposed sub-projects would not expand irrigation to new areas or alter the nature of the original schemes. The areas that would be rehabilitated are relatively small; the average area with on-farm works is about 2,000 ha. Some collector drains servicing larger areas are anticipated to be rehabilitated as well but no additions or alterations are planned as compared to their original design; (b) because of the small size of the individual sub-projects, their implementation is not expected to adversely change the quality or quantity of water flows to the other riparians; the improvements in irrigation would have a positive environmental impact by reducing water losses through improved conveyance and flow control; new drainage construction is very limited so that the increases in drainage discharges will be very small as compared to the water flows in the receiving water bodies; (c) there is no indication that any ongoing or planned projects in the riparian countries could adversely affect the sub-projects. It may, therefore, be reasonably assumed that the project would not be adversely affected by the other riparians possible water use; and (d) a review of existing international agreements and - 32 - arrangements between Kazakstan and riparian countries has shown that none of these legal instruments would require notification for the activities to be carried out under the project; GOK has confirmed this in writing. All sub-projects to be financed under the loan would be checked by the Government, and reviewed by the Bank, to ensure that they meet all applicable international water requirements. - 33 - V. PROJECT IMPLEMENTATION A. Project Organization 5.1 Organization at the National Level. Government has delegated overall responsibility for project implementation to the Ministry of Agriculture, except for parts of the environmental sub- component (paras. 4.27 and 5.11). 5.2 Inter-Ministerial Coordination. An Inter-ministerial Coordinating Committee (ICC) has been established composed of the Minister of Agriculture (Chairman), the Deputy Ministers of Economy, Finance, MOEB, and Construction, the Deputy Chairman of the CWR, the Director of the PIU (Secretary) and representatives of the Committee for Foreign Investments, the Ministry of Geology, the State Committee on Land Relations and Organization of Land Use (SCLR), the HS, SANEPID, the CF, and farm managers. The Committee would meet quarterly, or more frequently when required, to review progress and resolve problems of inter-agency coordination. 5.3 Project Organization at the Provincial Level. Oblast Coordination Committees have been established for Year One projects to provide the necessary coordination on project matters at the provincial level. Most ministries and national agencies are represented at the Oblast level, so that the Committee will be an image of the ICC at the national level. These Committees would be chaired by the Deputy Governor of the Oblast. Other OCCs for the remaining sub-projects would be established one year prior to the planned implementation period. B. The Ministry of Agriculture 5.4 General. Details of MOA organization are provided in Annex R and Chart 1. MOA does not maintain a specialized department for irrigation and drainage planning, design and execution; this task was carried out by its design institutes which are now financially self-supporting. Development of new projects is currently being promoted by the financially independent Republican Association "Kazakgromeliovodkhoz", an agglomeration of design institutes and construction organizations. There is no department for extension or training. Environmental monitoring (mostly soil salinity and depth to ground water) is the responsibility of three monitoring units, locally called "Expeditions", with offices in Almaty, Zhambul and Taldykorgan. 5.5 Project Implementation Unit. The MOA management, administration and coordination of the project will be the direct responsibility of the already established Project Implementation Unit (PIU). The Director of the PIU will be directly responsible to the Minister of Agriculture . The PIU will have units for Contract Administration, General Administration and Accounting, Monitoring and Evaluation, and a Technical Unit comprised of the necessary specialists (Charts 2 and 3). Assurances were obtained during loan negotiations that the PIU would be adequately staffed and would continue to employ a Project Director and professional staff that would be acceptable to the Bank. 5.6 The PIU will contract all consultants required to assist with project implementation, including but not limited to: (i) management and engineering consultants to assist with overall project planning and management and the design and implementation of the irrigation and drainage works; (ii) farm management and training consultants to assist with the implementation of the agriculture - 34 - component; and (iii) environmental consultants to assist with the implementation of the environmental sub- component. For summaries of the Terms of Reference see Annex S. 5.7 Environmental Unit. The MOA has at present no environmental review or planning capacity. An Environmental Unit (EU) would be established in the MOA headed by a Senior Environmental Advisor who would be directly responsible to the Minister. He would be supported by two environmental specialists. The EU's responsibilities would include but not be limited to: sectoral environmental policy making, planning and management to meet MOA responsibilities under national environmental legislation; developing MOA's EA capacity for sectoral, regional and project-specific activities; coordinating development and enforcing sectoral environmental policy directives; preparing sectoral environmental strategies and action plans; coordinating sectoral environmental training; and liaising with other environmental agencies. Assurances were obtained during loan negotiations that the EU be established within the MOA prior to March 31, 1997. C. The Ministry of Ecology and Bioresources 5.8 General. The Ministry was established in 1992. It is a planning, management and monitoring agency mandated to promote the protection and rational use of natural resources. MOEB depends on Government funding and is severely curtailed in all aspects of its mission. The Ministry has undergone at least two reorganizations since its founding. The recruitment and retention of trained specialists remain a problem, and are likely to continue until the economy improves. Laboratory facilities are antiquated and ill-equipped, hindering the accomplishment of basic data gathering and enforcement (Annex T, Chart 4). 5.9 State Ecological Expertise (SEE). The law "On Environmental Protection" has provided for mandatory SEE (environmental review) prior to making any development decision; public and private financing of a project can start only after obtaining a positive SEE. All development programs, plans and designs, together with Environmental Impact Assessments are subject to an SEE. All projects with foreign investments are subject to SEE at the national level. MOEB's Department for SEE and Radiological Safety is responsible for normative requirements and guidelines for EIA and SEE. 5.10 State Ecological Inspection (SEI). SEI is an organizational entity within MOEB with the prime responsibility for state environmental control to ensure compliance with existing legislation, standards, requirements and conclusions of SEE. SEI issues licenses and permits for use of natural resources, waste disposal, and emissions and discharges of pollutants. It assesses fees and fines for use of natural resources and pollution, and clears permits for surface and ground water use, importation of agro-chemicals, etc. SEI also controls handling, storage, transportation, use and distribution of pesticides, herbicides and other agro-chemicals; as well as compliance with national environmental and water legislation. D. Organization of Environmental Sub-Component 5.11 The overall responsibility for coordinating the activities under the environmental sub- component will rest with the PIU, as well as all aspects of contracting, procurement and financial management. The principal agencies responsible for the various elements of this sub-component are: (a) Institutional Development: MOA and MOEB; - 35 - (b) Special Environmental Studies: MOA; MOEB and AAS; (c) Environmental Monitoring: MOA, MOEB, Hydromet, CWR, MOG, SANEPID; (d) Pilot "Clean Drainage Water Project": Kaznekhanobr; and (e) Afforestation: CF. Other participating agencies will include the Ministry of Justice, Research and Design Institutes, and subordinate national and regional bodies of above ministries. Environmental consultants recruited by PIU would assist the PIU and relevant counterpart agencies with implementation. E. Organization of Agricultural Component 5.12 The overall responsibility for implementing the agricultural component will rest with the Department for Production, under the direct leadership of MOA's Deputy Minister in charge of this Department. However, all aspects of contracting, procurement and financial management will be handled by the PIU. Farrm management and training consultants, contracted by the PIU, will take responsibility for the preparation of short farmers' training courses and workshops and carry out the training, demonstrations and farmers' information services program as spelled out in Annex J. The demonstrations in the farmers' field will be planned and carried out in close coordination with the PIU. F. Project Preparation and Bank Review 5.13 Standards for Surveys, Investigations, Planning and Design. Acceptable international standards will be introduced for survey, investigation, planning and design practices under the project. Criteria for on-farm irrigation planning, drainage planning and comparing economic options for on-farm irrigation have been agreed upon and are available in the PIP. 5.14 Environmental Impact Assessments. Although not required by the Bank, Kazak law requires the preparation of ElAs and SEE reviews for each sub-project. These will be prepared by the PIU consultants for review and approval by the MOEB. It has been agreed that the already prepared draft SEA and two draft pilot EIAs will he finalized during the bridging operation, incorporating the comments provided by MOEB and the Bank. The English summaries and conclusions of the SEE documents are expected to be furnished to the Bank prior to the submission of the first draft bidding documents for civil works. 5.15 Bank Review. 7he selection of sub-projectsfor which updated/detailedfeasibility studies will be prepared would be subject to Bank review and concurrence, based on a review of the pre- feasibility reports preparedfor each sub-project. Assurances were obtained at negotiations that feasibility studies, EIAs and conclusions of SEE reviews for sub-projects would be submitted to the Bank for review and approval. G. Arrangements for Construction 5.16 Domestic Construction Capacity. It is expected that most civil works will be undertaken by local civil works contractors. More than 30 former state construction organizations have been transformed in private joint-stock companies; most of them have experience in irrigation construction - 36 - works. Due to lack of Government funding for construction, these contractors have lost much of their former production capacity due to heavy reductions in staff, loss of operable equipment and lack of spare parts. However, as the sub-projects are small, local construction capacities should still be sufficient for implementation. Two week training programs will be conducted to instruct national contractors on the contents of the bidding documents, the bidding procedures, commercial practices for importing goods and the arrangements for construction supervision. 5.17 Supply of Locally Manufactured Concrete Elements. Concrete pipes and pre-cast irrigation structures are traditionally widely used in Central Asia. Quality of design, production and installation have however not always been adequate. The following measures will be taken to overcome these problems: (i) appropriate specifications (including the use of air-entraining admixtures to reduce damage caused by the many freezing/thawing cycles); (ii) sampling and testing; and (iii) adequate construction supervision. 5.18 Construction Supervision and Quality Control. Independent construction supervision and strict control of construction quality on behalf of the client did not exist in the FSU, which contributed considerably to poor quality construction as compared to acceptable international standards. To address the lack of supervision, detailed procedures for construction management, quality control, inspection procedures and material testing have been prepared. Assurances were be obtained during loan negotiations that internationally acceptable standardsfor construction and construction supervision would be applied during project implementation. 5.19 Leasing Specialized Construction Equipment. The domestic construction industry lacks certain specialized construction equipment such as trenchless tile drain machines. Arrangements will be made under the project for the PIU to procure such equipment and lease it to the contractors. 5.20 Environmental Impact. Procedures to mitigate any adverse impacts during construction will be included in the bidding documents; this may cover site stabilization, collection of construction materials and wastes, procedures to ensure environmental protection, and the safety and health of workers. 5.21 Project Implementation Plan. The detailed work plan for the first two years of project implementation and the preliminary plans for subsequent years are included in the Project Implementation Plan. Assurances were obtained that the detailed workplan will be updated regularly by the PIU, at least twice a year, and would be subject to Bank review. Generally the work plan would be updated just prior to the arrival of a Bank supervision mission. A typical plan for a sub-project is shown in Annex N. H. Farmers' Participation 5.22 In order to ensure that farmers assume responsibility for the cost and operation and maintenance of on-farm project investments, the project will adopt a participatory process to engage farmers in decisions regarding design, implementation, O&M and cost recovery. This iterative process will begin with the presentation of alternative designs, and continue to the final stage of performance testing and turnover, which will include detailed O&M plans. The first step in the process will be to develop an acceptable participation framework. Ideally, decisions would be made by a general assembly. More likely, however, a group of farmer representatives will be created that will ultimately report to the assembly. Each farm will establish its own participation protocol that must be endorsed by the PIU before any action is taken. Final approval of any sub-project will require precise documentation of the - 37 - consultation process, as well as clear guidelines for participation in subsequent decision making and monitoring. As a first step in this process all potential participating farms for year I and year 2 sub- projects have signed Letters of Intent indicating the farm's desire to participate in the project and to pay the cost-recovery fee. I. Financing of Sub-Project Works and Equipment 5.23 The major investment component under the project would be for the rehabilitation and improvement of on-farm irrigation and drainage systems. Participating farms would have to repay such investments. However, the banking system in Kazakstan is still inadequate and would not be able and willing to handle long term loans for investments in infrastructure. As Government has clearly an interest in protecting agricultural land from further deterioration, it is reasonable that Government would share in the risks associated with investing in land improvements. It has been agreed with Government that cost recovery for on-farm works and installation of irrigation equipment be undertaken through a cost-recovery fee that is linked to the land and would be assessed on a per hectare basis. This would also have the advantage that responsibility for repayment is passed on to a new owner after sale, bankruptcy etc. Farms would initially sign a letter of intent after general agreement indicating their decision to participate in the project and their agreement on the scope of the work to be carried out. Subsequently, after detailed designs and cost estimates have been completed, the farms would sign an agreement with the MOA for implementation and the terms for repayment. 5.24 The cost-recovery fee would be a per hectare charge based on the amortization of the on-farm investment costs. The water code of 1991 provides the legal basis for such a fee as it contains the provisions for per hectare charge to recover the costs of capital The costs would include actual construction costs including works and equipment. The fee would seek to recover between 70 to 80 percent of the investment cost and would be based on a 30 year amortization period with a five year grace period an annual interest rate in US Dollars of eight percent. The percentage of costs to be recovered is consistent with the fact that some of the benefits of the investments accrue to beneficiaries outside the farm (decreased water losses, improved water quality). Since all the benefits can not be captured by the participating farms, partial cost recovery from the direct beneficiaries is justified. The annual per hectare charge derived from this calculation would be levied and collected by the Oblast level authorities. For the inter-farm works, an increased land levy is being proposed for farms benefitting from the improvements. The Government has prepared a draft resolution satisfactory to the Bank relating to the introduction of the cost recovery fee, including methods of calculating the fee, the selection of sub- projects, and eligibility criteria for participating farms. Adoption, by the Government of the resolution, satisfactory to the Bank, is a condition of effectiveness. J. Plans for Operation and Maintenance 5.25 Inter-farm Systems. The CWR has initiated a system of water charges to cover the costs of inter-farm operation and maintenance charges (para. 2.17). Experience with the system in its first two- years shows that the collection rates is about 47 percent, which is resulting in inadequate maintenance and deterioration of the system. The major factors explaining the low collection rates are the relative newness of the system, the novelty of charging for water, and the overall financial conditions of the farms given the low producer prices relative to world market prices. The Government price reforms currently being implemented should put farms into a much better position to cover water charges fully beginning in 1996. A concerted effort is now required by the Government to assure that discipline is introduced and maintained in the collection of water charges. Collection of water charges is undertaken by the - 38 - District Water Resources Committees, which are financially self-supporting and entitled to keep the revenues to finance their operations. An improved collection rate would thus have an immediate positive impact on O&M operations. To this end, assurances were obtained during negotiations that Government would implement measures to improve cost recovery rates for 0 & M of inter-farm works in accordance with the following schedule: 55 percent by December 31, 1997; 70 percent by December 31, 1998; 80 percent by December 31, 1999; and greater than 90 percent by December 31, 2000. These measures include: (i) monitoring of prices received by producers to determine the impact of price reforms on the ability offarms to pay charges; (ii) commitment by the Government to make up any shortfall in collection of targeted amounts that can be attributed to lack of progress in Government pricing or marketing reforms; and (iii) a system of enforcement to collect any overdue charges. 5.26 On-farm systems. Generally, most farms have tools and equipment which can also be used for on-farm maintenance of the irrigation facilities. Horizontal subsurface drainage systems will need periodic cleaning; farms with vertical wells will need to undertake repairs and maintain pumps and related equipment. An assurance was obtained during loan negotiations that a detailed O&M plan will be preparedfor each sub-project. K. Water User Associations 5.27 Although the management of privatized farms appears to resemble that of the previous state farm era, a qualitative shift is occurring with both positive and negative consequences. Management accountability is shifting from the MOA to members of the farm. The positive impact of the shift can be seen in the way managers are searching for ways to make the farms profitable, and thereby to keep their jobs. The negative impact can be see in the way that break-away farm units are virtually ignored by farm management. Managers are accountable to farmers, but to members, not non-members. In farms where the previous structure is intact, management continues to assume responsibility for the operation and maintenance of the farm's irrigation system, generally following old patterns. However, focus groups reveal that break-away farmers are generally located at the end of a delivery unit, and they frequently are given low priority in irrigation service. The project would support the creation of WUAs within the boundaries of the previous state farms, through which the members would assume responsibility for O&M of the irrigation and drainage systems, the main objectives being to ensure an equitable and timely water supply to the members of the WUA, and to maintain the system adequately. The WUAs would need to adopt appropriate rules and regulations for their governance, water distribution and allocation, sanctions for violations, conflict resolution mechanisms, cost sharing etc. To be effective, however, the associations must be given legal status, which will require an appropriate legal and regulatory framework. An assurance would be obtained during loan negotiations that MOA would continue to take action and develop, as necessary with the assistance of consultants, a legal and regulatoryframeworkfor the successful establishment andfunctioning of Water UserAssociations (WUAs). L. Project Monitoring and Reporting 5.28 Performnance Monitoring. Monitoring the implementation and performance of the project will involve the inventory, collection, processing and analysis of considerable data on water, natural resources, land use and agricultural production. Performance monitoring indicators have been agreed upon (Annex U). While overall responsibility for coordinating performance monitoring rests with the PIU, other entities involved include, inter alia, the Expeditions (for soil salinity, water quality and agricultural production), MOEB, and CWR (for collection of water charges) and MOA's Department of Production for agricultural training and Farm Management). The management and engineering consultant - 39 - will assist PIU and the Expeditions in establishing a GIS based Performance Monitoring and Evaluation Information System (PIS) to store and process the data. Initially, the PIS would be prepared for a typical sub-project such as Chengeldy. Once the GIS database structure and analysis procedures are established, the PIS can be turned over to monitoring and evaluation units for implementation. The necessary training and technical assistance would be provided to these units to carry out their tasks. 5.29 Reporting. PIU would prepare: (i) quarterly progress reports on procurement; and (ii) semi-annual progress reports by December 31 and June 30; copies would be sent to the Bank for review. The semi-annual reports would include information on: (i) completion rate of on-going works; (ii) payments made to contractors; (iii) reports on institutional developments (including technical assistance and training); (iv) an up-dating of the performance indicators; and (v) a report on difficulties encountered, proposed measures to overcome these and assistance required. An up-dated annual budget for project implementation will be prepared by October 31 for submission to the Ministry of Finance. A Project Completion Report would be prepared by the PIU within 6 months of project completion. M. Bank Supervision 5.30 The supervision plan in Annex V provides details on planned Bank supervision missions. An assurance was obtained at loan negotiations that a mid-term review of the project would be undertaken by a joint team from the Bank and MOA prior to October 31, 1999. N. Accounts and Audits 5.31 Project accounts will be managed by the PIU. The project accounts would identify all sources and uses of funds, including detailed accounting of the proceeds of the Loan and the operation of the Special Account. The project account would be audited by an independent auditor, preferably with an international accounting firm, acceptable to the Bank, and the audit reports would be submitted to the MOA and to the Bank within six months of the end of the fiscal year. The audit report would contain a separate opinion on the operation of the Special Account and the Statement of Expenditure (SOE) procedure, if utilized. - 40 - VI. PROJECT BENEFITS AND RISKS A. Introduction 6.1 Economic analysis has been used from the outset of project preparation as one of the main criteria for screening individual investment sub-projects that were included in the Government's original 1991 program of irrigation and drainage works. Other factors included in the screening are technical feasibility, expected environmental impact and potential for privatization. Based on these criteria, 34 potential sub-projects were identified during preparation and subjected to further economic and financial analysis that resulted in the list of nine core project, and 13 reserve projects that were considered during appraisal. 6.2 The economic analysis is an ongoing process that will continue through the final design and approval stages for each sub-project. Feasibility studies are being updated, final cost estimates are being prepared and the farms are participating in discussions of investment options and the implications for project costs and 0 & M. The dynamic nature of the process has already resulted in the elimination of some sub-projects, design changes for some of the other sub-projects, including changes in irrigation technology, or in the selection of different areas of rehabilitation and additional changes are likely .i-' One or two of the projects that currently are in the core program may still be replaced or substantially revised based on further consultations with farm members. 6.3 In all cases, choices of technology and equipment will be carefully reviewed. Final selection of sub-projects for financing will only be made on the basis of satisfactory results of the economic and financial analyses (at least 12 percent rate of return). B. The Sub-Projects 6.4 The economic analysis presented here focuses on the nine core projects identified for construction starts in Year One and Two. Base Investment costs for these sub-projects comprise about 57 percent of base project costs and 70 percent of the base costs for the irrigation and drainage works. Seven of the nine sub-projects involve comprehensive on-farm irrigation and drainage rehabilitation (CROIL), and two sub-projects involves rehabilitation of on-farm drainage works only, (Annex W, Table 1). Five to six sub-projects with investment costs totalling about US$26 million would be selected from the list of thirteen reserve projects or from other potential sub-projects for implementation beginning in Year Three. While the thirteen sub-projects have not been included in the analysis presented here, preliminary economic analysis during preparation and appraisal suggest that they have economic rates of return in a similar range to the returns for the Year One and Two sub-projects. 14/ An example of the type of changes being made in project design and selection occurred in the Chengeldy sub-project. The original design proposal included comprehensive irrigation and drainage rehabilitation including pump replacement at a very high investment cost. In discussion with farm managers and farm members, it became apparent that rehabilitation of irrigation and drainage in another area of the farm serviced by a different pump would not only reduce investment costs substantially but potentially would increase benefits as the area under the new scheme had higher yield potential than the original area. The changes also involved a switch from sprinkler irrigation to lower cost under surface irrigation. On the basis of these discussions, a new scheme was designed, costed and evaluated for inclusion in the core program. - 41 - C. Benefits & Costs 6.5 The primary benefits of the proposed project would be incremental agricultural production from: (i) increased efficiency in water use in the irrigation sub-projects through improved water delivery and irrigation practices; (ii) reversing the declines in yields from water logging and salinity build-up through improved drainage; (iii) expanded area cultivated through reclamation of some abandoned areas; and (iv) higher agricultural productivity as a result of farmers honing water management skills, adopting improved cultural practices, and switching to improved varieties and higher value crops. Benefit streams were derived separately for each sub-project and comprised yield increases, increased area under crop due to reclamation of abandoned irrigated areas, and in some instances changes in cropping patterns. 6.6 Yields throughout Kazakstan have declined by 12 to 70 percent since 1990 due largely to the economic crisis that has affected input use, fuel supplies, and equipment availability (paras. 1.7, 3.4). However, for the without-project case, it is assumed that the policy reforms currently being implemented by the Government will restore the incentive structure facing all farms and quickly reverse the recent decline in yields. Thus, rather than using the most recent yield data for the with-out project case, crop yields have been adopted that equal the average levels achieved in the three years prior to independence. For the with-project situation the assumptions used are as follows: - Comprehensive On-Farm Irrigation and Drainage (eight sub-projects). Yields are expected to grow by 23 to about 100 percent depending on the crop and sub- project area, with most yield increases in the 40 to 60 percent range (Annex W, Table 2). It is assumed that the full yields under with-project conditions would be achieved in the fifth year, starting from with-out project yields in year one. * On-Farm Drainage Works (two sub-projects). Incremental production is expected from two sources. First, without the investment in drainage, yields would decrease due to increased salinity and water logging. The gradual build- up in salinity could eventually reduce yields to zero. For the analysis it was assumed that the without-project yields would decline by one percent per annum over a ten year period and stabilize thereafter. Second, with improved drainage, yield increases could be anticipated. With-project yields were assumed to increase from 10 to 20 percent depending on the crop over the first five years. 6.7 Aside from yield increases, area under crop is expected to increase by about 10 percent or 2,200 hectares (Annex W, Table 1). The increase arises through the reclamation of irrigated lands presently abandoned due to waterlogging and poor drainage. Cropping pattern assumptions in the with- project case are derived largely from technical and agronomic recommendations for the agro-climatic and soil conditions found in each sub-project. 6.8 Besides the direct benefits to the sub-projects from the proposed investments, a potentially significant stream of benefits accruing to a larger segment of the farm sector could come from the pilot initiatives under the agricultural component. The benefits from the information generated by the component are difficult to quantify. But three potential type impacts are foreseen: * Direct improvements in productivity and production because of information on improved technological packages and management practices disseminated through demonstration plots, and the print and broadcast media. - 42 - * Improved Government services as the pilot initiatives tested under the project yield information that will enable the Government to design and implement effective farm support services quickly. In essence, the pilot could accelerate the learning curve on how to best provide farm services thereby bringing benefits on -stream from farm restructuring and improved farm management practices faster than would be the case without the project. * A similar set of benefits would arise from the institutional component. Improvements in the capacity of the Government to use participatory approaches in the planning, design and implementation of public investments in irrigation could lead to better investment decisions and faster implementation. 6.9 Another set of benefits that are difficult to quantify and often which also accrue to a larger population than the direct beneficiaries arise from the expected environmental impact of the project. Namely, the project would: (i) increase water availability down-stream through more efficient water use on sub-project farms; and (ii) improve water quality and availability through better drainage. Moreover, the project's interventions to strengthen environment monitoring capabilities could lead to improved investment decisions where water availability is a dominant factor and better operational decisions related to water use in existing enterprises where water is an essential input. 6.10 Price and Currency Assumptions. The monetary unit for the analysis is the US Dollar. Prices for non-traded items are 1995 prices converted to dollars using average exchange rates prevailing at that time. The prices of non-tradeable goods and services in Kazakstan are expected to increase significantly in the medium term relative to internationally tradeable goods to correct for the substantial undervaluation of the real exchange rate of the tenge. The magnitude and timing of the correction is uncertain. For planning purposes and for the economic and financial projections, it is assumed that local costs and prices will increase at a rate of 15 percent per annum over the project implementation period relative to the increases in foreign costs (of importable goods and services) which are assumed to move in line with the Bank's projections of increases in the Bank's MUV index. Since the analysis focuses on project starts in the next two years and since project construction for each sub-project is expected to take two to three years, all local prices have been adjusted from 1995 levels to the year 2000. 6.11 Farm gate prices for tradable commodities were derived by using the World Bank projections for year 2000 in 1990 constant price, using the G-5 Manufacturing Unit Value Indices for inflation adjustment (Annex W, Table 3). Prices for non-traded commodities (fruits and vegetables) were updated using the 1995 prices from local markets and escalated at an annual rate of 15 percent over the project implementation period. The value of fodder crops is based on the calculation of net returns estimated from feeding sheep, beef cattle and dairy cows. The value of livestock products used to estimate the price for fodder units was also based on international market prices. 6.12 Investment Costs. Calculation of investment costs for the economic analysis includes the full cost of the sub-project investment net of taxes adjusted as discussed above to account for the anticipated appreciation in the exchange rate for the tenge. (see Annex W, Table 1 for impact of this adjustment on investment costs). Replacement costs for sprinkler equipment, pumps, flow meters and hydrants were also included in the analysis. In addition to the civil works and equipment associated with the rehabilitation of the irrigation works, the costs of the agricultural component were included in the analysis. - 43 - 6.13 Operating Costs. Estimates of input requirements with the project are based on recommendation of Kazak Research Organizations. These estimates were reviewed and amended during project preparation to ensure that quantities of labor, seeds, fertilizers, herbicides, and insecticides are consistent with the anticipated yield increases. Farm tractor and machinery costs were based on the lines of equipment needed for 100 ha of each crop, and 1995 prices quoted by the company that supplies the equipment. 0 & M for on-farm irrigation works were also included. D. Econoniic Analysis 6.14 Economic rates of return have been calculated for nine of the sub-projects in the core program. The net benefit and cost streams were then aggregated to arrive at overall calculation for all nine sub-projects. Costs for the economic analysis includes the full economic cost of reconstruction and reclamation works, the cost of the agricultural component, and estimated incremental operation and maintenance charges. The economic costs range from US$850 to US$5,800 per hectare for sub-projects that include comprehensive irrigation and drainage works. Rates of return for the eleven sub-projects range from 15 to 54 percent with the overall rate of return for the nine sub-projects estimated at 27 percent with an opportunity cost of capital of 12 percent. The net present value of the nine projects is estimated at about US$31 million. - 44 - Table 6.1: Economic Rates of Return (at 12 percent) _______________________l IERR T NPV (US$ thousands) First Year Project Chengeldy 37 15,676 Kzyle-Agash 18 2,454 Golodnaya Steppe 26 9,991 Mirny Farm 40 18,374 Akkumsky Farm 18 520 Pritobolskiy Joint Venture 54 15,024 Second Year Project _ Dzhambul Farm 42 9,711 Priechenskiy Farm 33 5,478 60 Years of October Farm 15 1,636 Project As a Whole 27 31,170 6.15 Switching values were calculated for each sub-project for decreased benefit flows and increased costs. As would be expected, the sub-projects with relatively low rates of return were the most sensitive to changes in benefits and investment costs (Table 6.2). Since investment costs can be estimated with reasonable accuracy and the sensitivity analysis shows that the sub-projects are relatively robust in face of increased investment costs, the following risk analysis focuses largely on the benefit stream. - 45 - Table 6.2: Sensitivity Analysis Switching Values at 12 Percent ! Decrease in Benefits I Increase in Investment Cost ] (Percentage) l Chengeldy 67 267 Kyzle-Agash 28 58 Goldanaya Steppe 42 169 Mirny Farm 69 314 Akkumsky Farm 25 61 Pritobolsky Joint Venture 78 464 Dzhambul Farm 52 332 Priechenskiy 74 304 60 years of October 20 30 E. Risks 6.16 A major risk facing the project is that the expected yield increases will fail to materialize. The estimated benefit stream for the sub-projects involving comprehensive on-farm rehabilitation of irrigation and drainage depends to a large extent upon the farms achieving much higher yields. While the with-project yields assumptions are well below what is technically feasible based on agro-climatic and soil conditions, results from research stations, and yields in similar conditions elsewhere, they are still much higher than what was achieved in the past. To realize these higher yields will require an adequate incentive environment as well as the availability of inputs, fuel, machinery spare parts and financing. It appears that the government's price marketing and trade reforms are already improving the incentive structure in agriculture and the government is committed to completing the reform process as quickly as possible. Also important is the need for information and training in improved technologies, and better farm and water management practices. The project addresses this issue directly through the agricultural component which is intended to strengthen farm management and provide information and training on improved agricultural and water management practices. To test for sensitivity to reduced yields, the with- project yield assumptions at full development were reduced by 25 percent for the seven sub-projects involving comprehensive irrigation and drainage. All the sub-projects remained viable under the reduced yield assumptions (Table 6.3' - 46 - Table 6.3: ERR for Reduced Yields and Prices (at 12 %) Sub-Project ERR ERR Reduced Reduced Prices ________________________________________ Yields __________ Chengeldy JSC 28 25 Kzyl - Agash 14 15 70 Wells - Golodnya Steppe N.A. 25 Mirny Farm 32 24 Akkumsky Farm 12 17 Pritobolskly Joint Venture 40 32 Dzhambul Farm 29 23 Prirechny Farm 21 22 60 years of October Farm N.A. 10 6.17 Another risk for the project benefit stream arises from price uncertainty. There are two issues. First, is the financial risk that government price, trade and marketing policy would continue to drive a wedge between domestic and world market prices. For the financial analysis, prices were kept the same as for the economic analysis under the assumption that the current pace of government reform would be sustained, so that by the time the first year projects are completed in 1998, no significant gap would remain. The experience during 1995 of apparently significant improvement in farm prices supports the assumption that domestic markets will become fully integrated with international markets well before that time. 6.18 The second issue relates to the price levels assumed for the economic and financial analysis, particularly for crops considered to the non-traded. There is considerable uncertainty about the magnitude of the expected correction for the undervalued real exchange rate of the tenge (para. 6.10). In the analysis, it was assumed the prices of non-traded fruits and vegetables would rise faster than the prices of traded goods. It is possible that because of the relative price changes, commodities such as fruits and vegetables that are now not traded could potentially become traded. It is also possible that a production response to higher prices could dampen domestic price increases. To test for such uncertainty, prices of non-traded fruits and vegetables were held constant at their 1995 level while local investment costs were inflated at 15 percent per annum throughout the investment period. The results show that one of the projects with an ERR's near the opportunity cost of capital are sensitive to such price changes and become unviable (Table 6.3). 6.19 Another financial risk is that Government is unable to provide the estimated $20 million as its contribution to project costs. The project has been scaled to a level commensurate with likely availability of Government resources to cover local costs. The Government has also placed a high - 47 - priority on such rehabilitation efforts and assurances were obtained at negotiations that adequate budgetary provisions will be made in the budget. 6.20 An institutional risk arises from the fact that the proposed executing agencies may not have the capacity to administer such a large and diverse reconstruction effort to the international standards required. The project would address this risk through two different measures. First, consultants will be recruited to assist the PIU in overall project management and planning. The consultants will also be responsible for supervision of construction. Second, the project will provide training to the local construction agencies expected to participate in the project in bidding procedures, understanding the bidding documents and arrangements for construction supervision and bid preparation. To assess the impact of this risk, the overall rate of return was tested for sensitivity to delays in project implementation. A one year delay in project benefits decreased the ERR from 27 to 19 percent. F. Financial Analysis 6.21 Financial analysis was undertaken to asses the ability of all the sub-project farms to pay for the investments in on-farm works. For the analysis, financial prices are assumed to be the same as economic prices as government price, markets and trade reforms currently implemented are expected to remove remaining distortions well before construction of works are completed. Investment costs as well as costs for inputs are adjusted by including the value-added tax and import duties. Table 6.4: Financial Analysis _ FRR (%) First Year Project _ _l Chengeldy 27 Kzyle-Agash 16 Golodnaya Steppe 19 Mirny Farm 33 Akkumsky Farm 11 Pritobolsky Joint Venture 41 Second Year Project Dzhambul Farm 26 Prirechensky Farm 27 60 Years of October Farm 13 - 48 - 6.22 The results show a range in FRR's of 11 to 41 percentL5'. The analysis suggests that sub- projects at the lower end of the range would find it difficult to pay cost-recovery fees based on full recovery of investment costs including the value-added tax. However, the Government has decided that calculations of the cost recovery fee would exclude the value added tax, Moreover, because of expected externalities arising from the on-farm investments, the Government will set the cost recovery fee rate between 70 and 80 percent of on-farm investments. Under these assumptions, the financial rates of returns for all sub-projects would be satisfactory. 15/ Akkumsky is just below the proposed cut off but will be retained in the investment program because of the parallel pilot activities to be undertaken on the farm with grant financing. - 49 - VII. AGREEMENTS AND RECOMMENDATIONS A. Agreements Reached During Negotiations 7.1 At Negotiations, the following agreements were reached: (a) The Loan Agreement provides that procedures for the selection of sub-projects would include: (i) the preparation of pre-feasibility studies satisfactory to the Bank; and (ii) the preparation and submission to the Bank for no objection of feasibility studies, EIAs and SEE reviews for sub-projects in accordance with the Bank's and Government's EA requirements and procedures. (paras. 4.45 and 5.15); (b) The Loan agreement specifies that eligibility criteria for farm participation in the project, requiring that sub-projects: (i) rehabilitate existing irrigation schemes and involve no new irrigation except for land previously irrigated but now abandoned; (ii) be on private farms only; (iii) have economic and financial rates of return equal to or greater than twelve percent; and (iv) address the risk of encountering unknown archaeological or historical sites by adopting and following appropriate procedures, satisfying to the Bank (para. 4.45); and (v) not cause deterioration of water quality in areas outside the sub-project, meet all local and national environmental standards, and include in their design and implementation, mitigation measures to ensure compliance with health, environmental and safety standards (para. 4.45), etc. In addition, assurances were obtained at negotiations that: (i) the by-laws of participating farms would guarantee the rights of the individuals to withdraw their shares and establish private farms (para. 4.24); and (ii) detailed 0 & M plans would be prepared for each sub-project (para. 5.26); (c) The Loan Agreement provides the PIU would be adequately staffed and would continue to employ a Project Director and professional staff that would be acceptable to the Bank (para. 5.5); (d) The Loan Agreement provides that Goverrnment would implement measures to improve cost recovery rates for O&M of inter-farm works in accordance with the following schedule: 55 percent by December 31, 1997; 70 percent by December 31, 1998; 80 percent by December 31, 1999; and greater than 90 percent by December 31, 2000 (para. 5.25); (e) The Implementation Schedule to the Loan Agreement provides that the Government would review with the Bank on an annual basis its investment program in irrigation to assure that only priority investments are undertaken and that planned investments would not endanger counterpart funding for the project (para. 4.32); (f) The Loan Agreement provides that a joint Bank/MOA mid-term project review would be undertaken prior to October 31, 1999 (para. 5.30); - 50 - (g) The Implementation Schedule to the Loan Agreement requires the establishment of an Environmental Unit within the MOA by March 31, 1997 (para. 5.7); (h) The Project Implementation Plan (PIP) will be updated at least twice a year and would be subject to Bank review (para. 5.21); confirmed in the minutes of negotiations; (i) The Implementation Schedule to the Loan Agreement indicates that MOA would continue to take action and develop, as necessary with the assistance of consultants, a legal and regulatory framework for the successful establishment and functioning of Water Users Associations (para. 5.27); (j) The Government would: (i) introduce, beginning in FY97, a line item in the draft national budget for the project until its completion, for the sole use of the project, and in an amount to be annually agreed with the Bank; and (ii) provide sufficient funds in its annual budgets to cover routine environmental monitoring activities by MOA, MOEB, MOG, Hydromet, and SANEPID in the sub-project areas (para. 4.32); confirmed in the minutes of negotiations; and (k) Construction management and supervision procedures, acceptable to the Bank, will be applied (para. 5.18); confirmed in the minutes of negotiations. B. Conditions for Board Presentation 7.2 The following were satisfied as conditions of Board Presentation: (a) The submission of a draft resolution satisfactory to the Bank, on the framework for introducing the cost-recovery mechanism for on-farm investments (para. 5.24); and (b) The establishment of the Inter-ministerial Coordination Committee; and Oblast Coordination Committees for the Year One sub-projects (paras. 5.2 and 5.3). C. Condition of Effectiveness 7.3 The following is a project-specific condition of effectiveness: adoption of the draft resolution, satisfactory to the Bank, on the cost-recovery mechanism for on-farm investments (Para. 5.24). D. Conditions of Disbursement 7.4 The following is a condition of disbursement: payments made for expenditures in respect of Category (2) of the loan proceeds would be made only for sub-project selected, approved and implemented in accordance with the procedures and eligibility criteria, and on terms and conditions specified in the resolution on the cost-recovery fee, specified in Schedule 7 to the Loan Agreement and satisfactory to the Bank (para. 4.42). - 51 - 7.5 Recommendations With the above agreements and conditions, the proposed project would be suitable for a Bank loan of US$80 million. - 52 - Annex A REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT FARM PRIVATIZATION 1. A Social Assessment was undertaken by a local private research firm prior to the mission. The assessment focused primarily on the issues of privatization and participation. There were five main components to the social assessment. One component, consisting of a series of rapid farm assessments, was conducted by a Bank social scientist. The other components were undertaken by the local private research firm: in-depth interviews with the managers of 30 farms being considered for inclusion in the project; a socio-economic survey of 495 households on 10 of the 30 farms located in 5 oblasts; focus group discussions in 5 of the 10 farms, each of which has experienced some degree of restructuring; and an overview of the roles and relationships of other institutional stakeholders at the national, oblast and district level, particularly the Ministry of Agriculture and the Committee for Water Resources. The Mission made use of preliminary data from the management interviews and survey; final data will be available in late July and a full report will be completed thereafter. This brief note concentrates on the privatization and participation issues that most immediately affect the decision to proceed with project preparation. Privatization 2. Since 1992, 1,700 state farms in Kazakstan have been privatized. The remaining 425 farms are scheduled to be privatized by the early 1996. It is very clear, however, that privatization is a process, not a discrete event, and formal registration is only the beginning of the process. When the members of state farms decide on the structure of a new privatized entity or entities and adopt appropriate by-laws, they take the first step in a longer process that will continue to evolve over time. Consequently, the proposed project will not influence privatization policies or the implementation of basic policies, but it will contribute to the evolution of the privatization process and, as appropriate, the subsequent restructuring of former state farms. The Formal Process 3. By all accounts, formal privatization has been a lengthy procedure, largely directed by officials of the oblast administration under the oversight of the State Committee for Privatization. The basic process unfolds as follows: * before privatization the Committee assesses the value of property on a farm, allowing for debt, inflation and depreciation, and establishes a standard "land share" for each farm member that will eventually materialize as a certificate. * farm management generally undertakes an informal consultation process to establish the basis for consensus on the structure of the new farm, as well as the allocation of land and property shares. * this is formalized in a meeting of the general assembly during which working members of the farm choose the model of privatization, establish by-laws, decide - 53 - Annex A on the allocation of assets--property shares and land certificates--and elect a manager. * distribution arrangements vary--working members receive both property shares and land certificates; they also decide whether or not to issue land certificates to "social workers," pensioners and others, as well as a formula for allocation. * subject to the decision of the assembly, a manager who has been on the farm more than 20 years is entitled to receive 10 percent of the land, as well as temporary use of another 10 percent that can be converted into ownership if production improves significantly over 5 years. 4. Farm members actually choose the structure of the newly privatized entity or entities, sometimes against the recommendation of management. Through farm managers, each oblast administration has promoted a particular model, invariably based on the establishment of a single large commercial farm that essentially maintains the previous management structure. The oblasts also provide model by-laws that the farms adapt and submit to the State Committee for approval. Practice and Results 5. In practice, administrators have only been partially successful in their attempts to manage the process. Although most farms adopt the model being promoted by the oblast, the interpretation of the model varies from one farm to the next and appears to be subject to change over time. That is, despite the efforts of oblast administrations to limit farm restructuring, it is nevertheless occurring. Likewise, some farm managers have been elected to remain in their previous positions, but others have been replaced immediately, generally by a member of the farm. Members of many farms refuse to grant eligible managers the 10 percent share permitted by decree, even if they retain them. Invariably, the new farm has an overall management structure that resembles the previous state structure; however the appearance is somewhat deceptive, as management roles are rapidly evolving in response to new rules and new clients. Although they have limited choices, farm members ultimately assume an active role in the deliberations and decisions, frequently surprising managers and officials. Whatever structure is chosen, members legally are guaranteed the right to exit a larger group and obtain their own share of the land, and managers are accountable to the membership. 6. Of the 30 farms subject to management interviews, 22 have already been privatized and 7 more will be privatized before the end of the year. Only one farm, a research farm, is not slated to be privatized and thus will be excluded from the project. Privatization has taken several forms, most of which are basically collectives or associations of smaller cooperatives and/or private family units. Each has retained some elements of the previous management structure either as the management entity or as an umbrella, coordinating entity. They fall roughly into five categories: * joint stock companies (8), in which members receive shares with the right to dividends, as well as debt obligations, in proportion to their property shares; operationally members and/or brigades work under an annual contract, which specifies production obligations as well as the responsibilities of farm management. - 54 - Annex A * collective enterprises (7), covering a wide spectrum of arrangements from an aggregate of small units to a large unit which may preserve the former management structure with the exception that the manager is elected by farm members; if the latter, land certificates do not relate to specific holdings unless a member separates from the group and establishes a separate farm. * farmers associations (6), which can include individual farms, cooperatives and farms and combinations; the overall management increasingly provides services, rather than direction. * comrade associations (3), similar to collectives except that individual farmers execute annual contracts with management and share profits related to effort as well as success at meeting targets. * private enterprises (4), which include both single ownership farms and other arrangements under which farm members essentially function as employees. 7. Nineteen of the 30 proposed project farms have already restructured to some degree. Joint stock companies are the least likely types to restructure. Fourteen of the restructured farms have a single large unit or association and a number of small units, either individual family farms or small cooperative units that generally aggregate the holdings of an extended family. The range extends from a cooperative and 3 small units to an association and 2032 small units. All of the farms that privatized in 1992 have restructured somewhat; in one case, at least, small family units broke away after two years. We expect this pattern to become common, but it is still too early to determine whether or not this will be the case. The other five of the restructured farms have both individual farms, larger units that may or may not correspond to the previous brigade structure, and an umbrella association. Assessment 8. The situation is very fluid. The privatization experience is either recent or emerging on the proposed farms, and it will take a few years to establish clear patterns. It is too early to expect major restructuring to be widespread, but it is clear that new management pattems are getting established and the adoption of one structure does not preclude changing it over time. On balance, the mission concluded that the environment is basically positive and dynamic. There seems to be a tendency toward greater variation in type of ownership over time, rather than less, and farm structures will continue to evolve. Similarly, farm management will become more accountable as farmers get used to making more decisions and increase their demands on managers. 9. The first step in the privatization process has been neither as open, informed or transparent as it could have been, but it is clear that farmers ultimately chose a course for their future and managers understand what it means to be accountable to their members. Consequently, the important issue to consider is the future of the privatization and restructuring processes. Next steps will depend very much on the results of experience, as well as a number of external factors beyond the control of either farmers or farm managers. Ultimately, the real test of privatization is the extent to which the new farms, collectives and enterprises are financially viable and improve the standard of living of farmers and farm members. Further evolution of farms, and more restructuring can be expected to result from either or both of two scenarios: - 55 - Annex A * a positive experience encourages new farm entrepreneurs to emerge, leading to the creation of new units that are appropriate scale for local conditions, including markets; or * a negative experience prompts members to break away from larger units to create subsistence units over which they have some modicum of control, however limited may be the prospects for future prosperity. 10. A third scenario poses a particular threat to the privatization process, as well as restructuring: land consolidation in the hands of a few families or managers. Some farm managers and brigade leaders have already begun the process of aggregating land certificates in the attempt to create large operating units or to gain sole ownership. Until a land market develops, and until the economic situation improves in Kazakstan in general, and on particular farms, both farms and farmers are extremely vulnerable. Given the legacy of the state farms, it is reasonable to expect cooperative and collective tendencies to persist among members of the farms, particularly because most of them were actually farm workers, not farmers; furthermore, even without the state farm legacy, it is unrealistic to expect most farm workers to become independent farmers. Nonetheless, it is reasonable to expect new farmers to emerge over time. But until they have gained experience, it is premature to expect most farmers to be able to make informed choices about their future roles as members of a large group or independent entrepreneurs. Farners now appear to be subject to exploitation by managers who have better access to information and real management experience. If farm managers are permitted to take advantage of the current vulnerability of farm members and consolidate land holdings, this process may be irreversible, thus precluding other members of the farm from making choices in the future. Our interviews suggest that farm members are not passive and may be able to resist such exploitation in some places, but this should not be left to chance. Until the privatization process has matured and people clearly have more options, efforts to accumulate use right certificates in few hands should be discouraged. 11. Some concern has been expressed that providing support to farms in Kazakstan, particularly for longer term assets, would impede further evolution of the farm restructuring process. This does not appear to be a serious concern for three reasons: i First, economic uncertainty currently makes farmers reluctant to be innovative, thus infrastructural investments that improve irrigation and drainage will enhance the economic status of the farms and offer new opportunities to farmers. This will promote further changes, rather than impede them. The training and information components of the project will also support this by increasing the level of skills needed for independent farming. * Second, mechanisms that promote participation and ownership, such as the consultation process to be introduced in the project, will also encourage promote entrepreneurship and restructuring. This will be included in the project. * Finally, irrigation fields are small enough to accommodate restructuring without requiring additional investment. - 56 - Annex A 12. In sum, the proposed project will support the ongoing process of farm restructuring. Training and Information 13. Farmers are reluctant to break away from new collective or corporate farms for a number of reasons: acceptance of existing management forms; lack of management skills that would enable them to operate new farms; lack of effective marketing structures; lack of operating capital and access to credit; and limited availability of inputs, spare parts and information. Although marketing, capital and inputs are critical issues, they are beyond the scope of the project. Farm management is important for the project, however, as it will affect the potential for increasing agricultural production that is created by the project. It is also important for the privatization process because management skills will affect the willingness of individuals or groups to risk establishing new units, as well as the survival of the new units that are established. The project will develop a number of practical training courses on production and management issues, demonstrations of improved water management and production technologies and create broader information dissemination mechanisms. This management training component--both financial and technical--will support privatization very concretely by assisting new family and small cooperative farms, as well as larger units that consider restructuring. Participation 14. A critical stage of farm privatization is when the farm (managers and/or farmers) extricates itself from the web of external controls and assumes responsibility for all aspects of farm operations, undertaken either individually or collectively. To strengthen the process of sharing responsibility the mission developed a multi-step consultation process to incorporate into the project design and implementation plan. This will engage both farmers and managers in making decisions and assuming responsibility for farm assets to be affected by the project. This iterative consultation process will broaden the prevailing concept of farm management and will contribute significantly, although indirectly, to making further steps in the privatization process more open, more transparent, and more informed. Water User Associations 15. The current management structure on most farms is adequate to deal with water-related issues without requiring the creation of new organizations. However, as farms restructure, water user associations will be useful to fill institutional gaps. Appropriate models for Kazakstan will be developed under the PPF that build on and strengthen community bonds. The project will then launch pilot efforts on farms already restructured to test and refine the models. - 57 - Annex B REPUBLIC OF KAZAKSTAN IWGATION AND DRAINAGE IMPROVEMENT PROJECT OVERVIEW OF INSTITUTIONAL AND LEGAL FRAMEWORK Organization of the Sector 1. A number of ministries, agencies, and organizations are responsible for managing and administering the water resources and environmental policies effecting the water and irrigation sectors in the Republic of Kazakstan. Since 1991, with the transition to a market economy, a number of organizational and structural changes have taken place within the Government. The Ministry of Reclamation and Water Management was eliminated in 1991 and replaced by the Committee on Water Resources. The Ministry of Ecology and Biological Resources (MOEB) was established in 1992 as the successor to the State Commnittee on Ecology and Nature Use and the Ministry of Forestry. Other changes may be expected in response to changing demands on the Government. The major institutions of the Government of Kazakstan concerned with the irrigation sector include: * Ministry of Agriculture (MOA). Ministry of Agriculture is responsible for the development of agricultural policy.; implementation of a program for the development of the agro-industrial complex; preparation of an investment policy for agriculture; promoting the rational use of farm lands; registration and management of the Land Fund. There are 16 subdivisions and 40 lower divi- sions in MOA throughout the Republic. Under the umbrella of MOA there are regional and district agricultural agencies funded by local budgets, union associ- ations, and numerous related but independent organizations. - Kazak Academy of Agricultural Sciences. The Kazak Academy of Agricultural Sciences contains 32 scientific institutes, which conduct research on resources related to agriculture, including forest management, range management, fisheries development, water management, and agro-economics. * Ministry of Geology and Protection of Underground Resources (MOG). The Ministry is the key state authority in the field of geological prospecting and protection of the underground resources, including water; sector policy-making and programming; licensing of underground resources; and enforcement of relevant legislation. * Committee for Water Resources (CWR). Its main responsibilities are to main- tain and operate the existing interfarm system for delivery of irrigation and rural drinking water through regional and district water resource committees; control the quantity and quality of water through the supervision of eight river basin water management agencies; set national water management policies; and administer international river systems with respect to water sharing. * Water Management Design Institutes. There are a number of design institutes in Kazakstan with experience in the planning and design of irrigation and - 58 - Annex B drainage projects. Most of these are now joint stock companies still depending on the State as a client. The capability of these institutes has been greatly reduced over the last several years because of a lack of funds. Kazgiprovodkhoz (DI) is the former central water management design institute for Kazakstan and still works closely with the Committee on Water Resources. Most of the regional institutes have been placed under administrative control of the Ministry of Agriculture. * Construction Organizations. There are general contract construction organiza- tions known as industrial unities (ICU) in each of the oblasts. Production and construction capabilities of these organizations have been cut way back. These former state construction companies are in transition from ownership by the State Committee for Property to private joint stock companies. They all have a similar organizational structure that includes a mobile mechanized fleet, a production engineering department, a specialized section for start up and fabrication, and separate plants for production and fabrication. Each region has facilities for producing prefabricated reinforced concrete structures and metal works. Although there are several cement factories and a pressure pipe factory in Kazakstan, many items such as pvc drainage pipe, pumps, and irrigation sprinkler equipment were manufactured in Russia. * Ministry of Ecology and Biological Resources (MOEB). It is an environmental policy planning, management, monitoring and enforcement agency mandated to promote the protection and rational use of natural resources. The Ministry is responsible for EA environmental protection and rational state control for use of natural resources that includes land resources, soil, water, forests, wildlife and fisheries. MOEB establishes and administers limits on use of natural resources; issues and regulates licenses and permits; determines acceptable limits on waste products and regulates their discharge in terms of quality and location; reviews the standards and limits established by other agencies; and assesses the environ- mental effects of projects and programs, prior to their construction or recon- struction. - Committee on Forestry (CF) is responsible for forestry policy making, program development forest cadastre and standard setting; forest protection and refores- tation, developing economic incentives and mechanisms for forest protection and use. * Hydrometeorological Service (HS). The Hydromet is the principal authority in the field of hydrometeorology and pollution monitoring, including weather, water, soil, climate, etc. forecasting for agricultural purposes, conducting weather modification activities and keeping an environmental pollution data bank. * Ministry of Construction, Architecture and Housing. The Department of Non- Agency Expertise under this Ministry has responsibility to enforce construction norms and standards in all construction activities. The Ministry reviews all - 59 - Annex B projects involving new construction and rehabilitation of existing facilities to ensure that Government standards and norms are met. * Ministry of Health (MOH). State Sanitary-Epidemiological Service (SanEpid) under the MOH has the responsibility for standards setting determining, preven- tion and mitigation of negative impacts of environrnental pollution on human health. * State Committee on Land Relations and Organization of LAnd Use (SCLR). SCLR is the main government agency entrusted with developing and implement- ing unified state policy on land management and ensuring land reform in the country. Other responsibilities include: state control for use and protection of land, land monitoring and state land cadastral, preservation and rehabilitation of soil fertility. * State Council on Ecology (SCE). SCE was created in 1993 in order to ensure cross-sectoral coordination on environmental issues and enforcement of imple- mentation of environmental protection activities and legislation. Unfortunately, the Government resolution remained mainly on paper. * Ministry of Economy. This Ministry is responsible for preparing, approving, and recommending technical projects for government funding. The State Price Committee which sets the level of prices for sale of commodities to the State is located in this Ministry. Legal Framework 2. There are a number of special codes and separate laws on water. However there has never been any legal arbitration dealing with the water laws, regulations or codes. Some of the major laws and codes involving the water resource and agriculture sectors include Law "On Environmental Protection" (June 1991) which establishes state ownership of the natural resources, including land, water, minerals, forests and wildlife; "Water Code" (March 1993) with the purpose of regulating water for domestic industrial and agricultural use and to ensure meeting environmental requirements; "Forestry Code" (January 1993) which describes the aims and scope of forestry legislation and introduces the concept of forest fund and forest fund lands and clearly states that forests are exclusive property of the Republic; decree on "Land" (December 1995) which elaborates on land ownership and classifies lands depending on the purpose of their use; Law " On Land Reform in Kazakstan" (June 1991) which states the objectives and conditions for land reform and its major directions; "Code on Underground Resources and Processing of Mineral Raw Materials" (May 1992) which defines underground resources as State property; and the Law "On Sanitary-Epidemiological Well-being of the Population" (July 1994) which declares the right of the people for healthy environment and establishes administrative, disciplinary, material and criminal liability for violation of Sanepid legislation. Law "On Enviromnental Protection" June 18, 1991 3. This is the umbrella environmental legislation in the country. The law establishes state ownership of the natural resources, including land, water, minerals, forests and wildlife. The law - 60 - Annex B mandates SEE for proposed development programs and projects to ensure environmental sustainability and provides for public participation. 4. Three types of environmental protection instruments are provided by the law: a permit system; emission standards (for air and water pollution and waste disposal); pollution fees and fines for use of natural resources and emission of pollutants. 5. Liability for environmental damage is supported by a provision of the following sanctions: disciplinary; administrative; civil and criminal. "Water Code" March 31, 1993 6. The aim of the water legislation is to regulate water for domestic industrial and agricultural use and to ensure compliance with environmental requirements. Regulations on pollution prevention and water conservation are stipulated. Principles of state registration and planning of water consumption, settlement of disputes and violations are included. Water resources are in the exclusive property of the state. Priority water use is for drinking and communal purposes. It is prohibited to put irrigation and drainage systems into operation without adequate measures designed to mitigate waterlog- ging, flooding, salinization, erosion, etc. as well as without installation of relevant hydro-technical facilities. The payment for water use is introduced. There are two types of water use: general and special. Water quality and quantity protection is given high priority. "Forestry Code" January 23, 1993 7. The code describes the aims and scope of forestry legislation and introduces the concept of forest fund and forest fund lands. It is clearly stated that forests are in the exclusive property (ownership) of the Republic, but there are also provisions for different forms of ownership of forest land plots. Reforestation, forest protection, enhancing forest productivity and sustainable forest management are amnong major responsibilities of the forest land owners. Vertical and horizontal levels of forest management authority are being established in the code. Different types of forest utilization and users are defined as well as forests are being divided into two categories. Forest which have mainly protective functions, including watershed protection, soil and wind erosion protection, greenbelts, etc., are in the first category. Requirements for commercial forest harvesting relationships, financing of forest sector, conducting forest cadastre and forest monitoring are being defined in this legislation. Liabilities for violation of forestry legislation, dispute resolution and superiority of international legislation are established. [Payments to reimburse for losses of forest production and when forest covered lands are taken away from their prime purpose of use are also introduced]. "Land Code" December 22, 1995 8. The new land code defines various categories of property rights, the circumstances and procedures for granting and transferring these rights and the role of the state in the process. Passage of the land code is an important step in securing rights to lands and providing the framework for the development of a land market. Land protection is considered to be one of the priorities and requires control, monitoring and enforcement. - 61 - Annex B Law "On Land Reform in Kazakstan" June 28, 1991 9. The law states the objectives and conditions for land reform and its major directions; establishes a special land fund to be formed on the basis of unallocated land or land unsuitable for agricultural production; determines the ways and types of privatization of agro-industrial enterprises. It also provides for establishing rural settlements' boundaries and documentation necessary to ensure land ownership. "Code on Underground Resources and Processing of Mineral Raw Materials " May 30, 1992 10. This legislation provides only for state property for underground resources including water; defines various types of their utilization and describes institutional responsibilities in the sector; mandates protection of underground resources and payments for their use; sets requirements for geological prospecting, licensing, design and construction, processing, state registration system, leasing rights; supports public participation, safety measures and protection of human health. It also provides for expert review and analysis of relevant projects and data; enforcement and liabilities for violation of the legislation. Law "On Sanitary-Epidemiological Well-being of the Population" July 8, 1994 11. This law is intended to further support the law "On Protection of Health of Kazakstan People" and declares the right of the people for healthy environment. It makes prevention of negative environmental health impacts a priority; mandates compensation for health damages and calls for greater openness of information. It describes institutional structure as well as responsibilities and authority of different levels of management in the sub-sector. The law mandates sanitary-epidemiological expertise (review) and defines its goals, objects and process; public san-epid expertise (review) is also instituted. The san-epid requirements for economic development, including project design work and construction of different facilities; food products and use of agro-chemicals; water supply and sanitation; utilization of wastes, and emergency situations are provided in this legislation. The law establishes administrative, disciplinary, material and criminal liability for violation of san-epid legislation. REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVENENT PROJECT IRRIGATED CROPS BY OBLAST (000 HA) Oblast Area Cereals Technical Crops Potato, Fodder Under l Vegetables Crops Total Rice Maize otal Sugarbets Cotton & Melons Total Maize Kazakstan 1855.20 596.59 110.61 108.35 189.87 48.82 106.83 85.00 984.07 244.55 Akmola 30.37 1.68 -- - 0.40 0.40 -- 7.96 20.34 3.00 Akiobe 35.71 0.37 1.81 0.61 5.61 27.93 9.63 Almaly 260.03 90.98 11.43 27.94 14.61 5.30 9.19 145.25 38.19 Alyrau 25.69 0.24 -- - 0.64 0.28 2.13 22.68 0.86 E-Kazaksaaii 80.91 20.83 0.06 1.37 0.35 1.52 57.18 17.87 Zhainbyl 199.12 740.10 14.69 20.19 16.97 8.97 95.94 27.27 Zhezkazgan 12.44 1.11 -- 0.02 0.02 1.06 10.24 0.04 W-Kazakstan 46.47 5.26 0.66 0.60 . 3.47 37.07 10.59 Karagaiida 66.55 6.24 -- 0.60 0.55 8.83 50.88 11.48 KzyI-Orda 240.73 144.05 79.68 15.00 2.98 0.63 4.16 89.54 14.66 Kokshetau 5.60 -- -= -- 0.11 0.11 1 .22 4.27 0.13 Kosianai 21.59 0.70 . 0.15 0.15 3.62 17.12 1.25 Mangislau 0.21 -- -- -- 0.05 0.16 -- Paviodar 70.03 5.48 1.20 0.37 4.54 58.81 28.60 N-Kazakstan 13.74 -- -- -- 0.81 12.93 -- Seinei 101.36 22.22 _ 2.32 0.43 2.55 74.27 23.29 Taldy Korgan 246.20 112.56 3.89 32.63 25.58 19.26 5.09 102.97 29.01 Torgai 3,17 -- - -- 0.08 0.08 -- 1.08 2.03 1.14 S-Kazaksian 395.28 110.52 15.62 18.Q5 117.16 2.72 106.83 13.13 154.47 27.45 REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT Project Area Soil and Water Conditions Project Name | Area Water Table Depth (ha)rGroundwater Saliiity (ha)j Irrigation iVater (ha) Sauliie Soil (ha) Oblast I_(ha) II g/L None WVeaA ]H,gh {Very high First Year Projects (1996/1997) I Chengeldy JSC (Pump Sta. #2) Almaty 2368 50 100 2368 2368 2218 150 2 Kzyl-Agash Taldy Korgan 1415 1415 1415 3 70 Wells,Maktaral District S. Kazakstan 7777 1944 389 4666 7777 (Golodnya Steppe) 4 Mimy Farn Karaganda 1333 67 133 800 1333 795 538 5 Akkunssky Farm Kzyl Orda 1069 703 366 1069 1069 914 155 6 Prilobolsky Joint Venture Kostanay 850 68 187 185 850 850 Subtotal 14812 888 2730 389 9088 5966 1069 5342 1693 7777 0 Second Year Projects (1997/1998) 7 Dzhambul Farm (Tashutkul) Dzhambyl 1144 266 874 323 266 1144 661 483 8 Prirechensky Farm Semei 913 913 663 250 9 60 Years of October Farrn Paviodar 4882 146 488 3906 1 4786 96 Subtotal 6939 412 1362 4229 266 2057 0 1324 5519 96 Total 21751 1300 4092 4618 9354 8023 1069 6666 7212 7873 REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT STATUS OF PROJECT FARMS Popu- Total Area Irrigated No. Oblast Name Status Date Type Units lation (ha) (ha) Ia Almaty Kerbulak S Aug- 95 Farmers Assoc. Individual + 948 6,914 3,032 lb Almaty Chingeldy P S Joint Stock Co. 2 Almaty Kapchagal S 95 Joint Stock Co. 1,850 6,671 2,659 3 Aniiaty Frunze P 95 Joint Stock Co. 2,447 59,975 1,661 4 Atyrau Ag. Exp. S NO 259 63,178 500 5 Alyrau Alga (XXI Party Congress) P Feb-94 Collective Enterprise Coll. + II 1,915 7,820 500(?) 6 Zhamiibyl Boluan-Shaolak S 95 Collective Enterprise Coll. + 5 2,496 94,194 2,175 7 Zhanibyl Kemer (Lenin) S 95 Collective Enterprise 5-6 Brig + 5 6,500 12,500 5,000 8 Zhambyl Zhambul S 95 Private Prod. Coop. Coop. + II 3,013 7,600 4,000 9 Zhamnbyl Uzsh-Bulanl (Kuralbek) P Private Prod. Coop. C'oop. + 5 2,606 2,756 1,015 10 Zhambyl Shakhanl (Chapayev) P Joint Stock Co. Co. + 5 2,523 47,815 1,039 I I Zhambyl Bostandiksky P Joint Stock Co. Co. + 15 2,460 79,881 1,458 12 Karaganda Mirny P Aug-94 Collective Enterprise Coll. + 3 1,560 10,876 3,331 13 Kzyl-Orda llyasov I P Apr-95 Tovarich 2,550 10,787 6,478 14 KzyI-Orda I]yasov 5 P Apr-95 Tovarich 2,550 15 Kzyl-Orda Akkumsky S Oct-95 l'ovarich 2,275 12,237 4,757 , 16 Kzyl-Orda Left/Right Bank Collectors X n.a. 17 Kzyl-Orda Interfarm Collectors X n.a. - I I I I | Popu- Total Area |Irrgaled K.I Oblast Nanie Status [Date Type Units lation I (ha) (ha) ] 18 Kostanay Pritobolsky P Mar-95 Joint Stock Co. 4,264 11,003 2,121 19 Kostanay Kostanaysky Kmosomolets X n.a. Flood Irrig. 20 Paviodar 60 Years of USSR P May-95 Association Indiv + 5 (59) 1,900 13,418 5,123 + Assoc 21 N. Kazakstan Tarangul Pitnoye Lakes X n.a. 22 Semel Prirechny P Jun-93 Private Enterprise* One Owner 1,391 11,297 1,243 23 Semnel Zharkyn P Jun-92 Association 195 + Assoc. 853 78,990 767 24 Semei Beket (70 Years of October) P Jan-94 Private Enterprise Enterprise + 4 2,012 64,949 2,085 25 Semel Furmanova . P Jan-95 Private Agribusiness Enterprise + 2 2,556 30,818 3,315 26 Taldy Korgan Kzyl Agash S Nov-95 Joint Stock Co. 4,066 111,487 926 c 27 Taldy Korgan Taldy Korgan Sugar Beet P May-92 Enterprise Enterprise + 5 28 Taldy Korgan Mukry P Jan-95 Association 5 coop+2+5 3,081 65,130 1,839 fam + Assoc 29 Taldy Korgan Talapty P Apr-95 Collective Enterprise 1,277 44,865 628 30 S. Kazakstan Makhtaral (70 wells) S Nov-95 Joint Stock Co. 12,346 12,121 10,853 31 S. Kazakstan Yntymak (59 wells) P Assoc. of Coops. 1590 + 9 8,790 5,382? 6,314 coops + Assoc 32 S. Kazakstan Dzetsal (60 wells) P Association 2032 + Assoc 10,367 5,736? 6,801 33 Zhezkazgan Talap (Zhezkazganski) P May-95 Collective Enterprise lndiv ? + 1,735 128,238 696 34 Zhezkazgan Aktostinsky P Feb-94 Collective Enterprise lndiv. + 583 5,063 1,907 * S = Staai; P = Private - Source: Farm Managenment Survey, May 1995 - 66 - Annex F REPUBLIC OF KAZAKSTAN IRGATION AND DRAINAGE IPROVEMENT PROJEcr PROJECT SELECTION AND ELIGIBILrrY CR1TERIA Project Selection Criteria (i) Participating farms shall be private farms; (ii) Sub-projects should aim at the rehabilitation of presently irrigated areas. No additional lands will be brought under irrigation, with the exception of irrigating previously irrigated lands but now abandoned; (iii) No diversion of water should be allowed from one river basin to another; (iv) No sub-project should drain or reclaim any significant area of natural wetland with a likely impact on an important area of wildlife habitat, or having an effect on major fishery; (v) There should be no use of untreated domestic wastewater for irrigation under any sub-projects; (vi) Sub-projects with tobacco cultivation would not be eligible for inclusion in the project; (vii) The feasibility study should indicate an economic intemal rate of return (EIRR) and a financial rate of return (FRR) equal to or greater than 12 percent; (viii) Willingness of participating farms to repay investment costs; (ix) Priority for implementation should be given to projects with the highest rate of retum; (x) Ground and surface water characteristics around sub-project areas should meet Kazak environmental standards acceptable to the Bank; (xi) EIAs and SEE reviews would be prepared in accordance with the Bank's and Government's EA requirements and procedures; (xii) Sub-projects should have an EIA and a positive conclusion of the SEE acceptable to the Bank; and (xiii) Adequate mitigation measures should be incorporated in sub-project design and implementation to ensure compliance with environmental, health and safety standards. Project Eligibility Criteria (i) The bylaws of each participating farm would guarantee the right of individuals and groups to withdraw their shares from the collective or corporate entity and establish their own independent farms; - 67 - Annex F (ii) "Chance" find procedures would be developed and applied to address the risk of encountering unknown archaeological or historical sites during implementation; (iii) All agro-chemicals to be applied would be approved, stored handled and distributed and used in accordance with the guidelines and requirements of Kazakstan acceptable to the Bank; and (iv) Detailed O&M plans would be prepared. KAZAKSTAN: IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT PROJECT SUMMARY TABLE 1 Base Costs T Onfarm/| Unil | Project Works T Drainage Total Project Name Oblast in US$ Alllion Interfarni CROIS New construction without drainage Total Irrigation Drainage I Total I Drainage Leveing CROIS (ia) First Year Sub-Projects (1996/1997) I Chengeldy JSC (Pump Sta. #2) Almaty 5.92 Onfann ha 2368 2368 600 600 2 Kzyl Agash Taldy Korgan 4.96 Onfarm ha 1415 1415 0 3 70 Wells,Maktaral District (Golodnya Steppe) S. Kazakstan 5.76 Onfarm ha 7777 7777 4 Mimy Farm Karaganda 5.57 Onfarm Iha 835 835 498 498 Interfann km 10 10 5 Akkumsky Farm KzyI Orda 0.85 Onfami ha 1069 1069 1069 1069 6 Pritobolsky Joint Venture Kostanay 3.24 On fami ha 850 850 320 1 320 Sub-total Onfarm ha 6537 6537 1989 0 0 0 8275 10264 Sub-total Interfarm km 10 10 Second Year Sub-Projects (1997-1998) 7 Dzhambul Farm (Tashutkul) Dzhamnbyl 2.65 Onfann ha 1144 1144 654 654 8 Prirechny Farm Semei 2 00 Onfann ha 913 913 9 60 Years of October Farm Paviodar 5.24 Onfarm ha 4882 4882 Sub-total Onfamm lia 2057 2057 654 0 0 0 4882 5536 Reserve Sub-Projects (1998/2000) oo 10 Kerbulak and Chingeldy Farmis Almaty 12.50 Onfarm lIa 1315 1315 967 967 Interfarm kin 3 3 1 1Kapchagai Farm Almaty 2.60 Onfarm ha 674 674 674 370 1044 12 XXI Party Congress Farn Alyrau 2.60 Onfarm ha 329 329 329 329 13 Boluan-Shaolak Fami & Bulambai Canal (Tashulkul) Dzhanibyl 4.50 Onfarm ha 639 639 596 596 Interfarm km II II 14 Lenin Farm (Tashutkul) Dzhambyl 5.30 Onfarm ha 1266 1266 722 543 309 467 1031 15 Kuralbek Fann Dzharnbyl 1.70 Onfarm ha 574 574 0 16 Zharkyn Farm Semci 1.40 Onfarm ha 650 650 0 17 70 Years October Farm Semei 2.70 Onfarm ha 1000 1000 0 18 Furmanova Farm Semei 2.10 Onfarm ha 857 857 0 19 Zhakmet Farm (Koksu) Taldykorgan 2.40 Onfarm ha 679 679 399 399 20 Mezherov Farm (Koksu) Taldykorgan 0.90 Onfarm ha 381 381 21 Talapty Farm Ialdykorgan 1.40 Onfamm ba 295 295 0 22 Aktostinski Farm Zhezkazgan 5.80 Onfamn ha 1428 1428 1428 1 1428 Sub-total Onfarm ha 10087 10087 5115 543 309 467 370 5794 Sub-total Interfarm km 3 3 II 0 0 0 0 iI rotal Onfann ha 18681 18681 7758 543 309 467 13527 21594 Total lnterfarn km 13 13 II 0 0 0 0 2 X~~~~~~~~~~~~~~~~~I i.AZAKS'l'AN: IRRIGATION AND DRAINAGE INIPROVENIENT PROJECT' St.iNIMA.RY' PROJEC'T ORKS Irrigafion, (ha) I D)raina ge (ha) Project Name (Oblast 4rea tTvul .Surf XeSpr,A krFlod UTaiaa Horlsontal Vericalj( Comrenis. vescriptiun * _ (hu) [ l l l t |(.7~~~~~ha) pern hi(,led| flirst 1'ear Sub-Projects (1996/1997) I I ' I!( hcngeldb JSC (Pump Sta F2) Alnialy 2368 2368 2 368 o(i 1 600 increase in wkaler suppl' 2K>lNI Agash l'ddy Korgan 1415 1415 1415 Construction has been slopped 3 70 Wells,Mktaral D)strict ((;olodnya Stcppc) S Kazakhsidn 7 837 i 7777 7777 Sjsisi,satioii ol rrigaied Iands aissy I alas KaLaga isda I 1333 g3i 835 49t 4R8 t0occsssrsng salssi,ioss DL.in,slo, ic,Ilicd s'Akkumsk5 I arm Kzl Itida 10691 1069' 1o)9 I, 0t) 1069 Redmisos in5 rc fields tismn 3 to 2 6 "ricutbIslsky Join Venture K.sotanay 850k 8950 8i5u 320 320o lnLreose Of ale[s SlppllJIN Sub-tolal r 148121 6537 4852| 1685 01 )02r4 1069 14)8 7777 Second Y'ear Sub-Projects (1997/1998) r 1 - 7 Dzhambul Farm (Tashulkul) zIhambyl 1144 I 1441 11441 15 6S4 654iSoil saliisizassoss and wsaler logging Requires land reclamissson 8 Pruechny Fami Senei| 913 9131 913 I I jConstruclion has been slopped 9 60 'ears of October Farsr. Paviodar 4882 i 4882 | 4882 Sail salsnhzasosi 1iladss CrccaLiL.sslor seqUsred Sub-totail 6939 20571 1 141 913F 01 5536T 01 4882 654j Reserne Sub-Projects (1998/1200) I I I i i - i) kerbulal and Chlsssgeldy Farints Alinaly 1315 1315 I(sAI 1215 907 I 967 Suoil salszalsoss I asid sclimasiona requsicd II Rapchagas Fain) Almaty 10144 674 674 10)44 1044 Soil satlnizauson I asJd seclamalson required 12 XXI Party Congress Fanis AlyFau 329 3291 329 329 329 Soil salinizatioss lasid reclaniassoss is requared (3 Boluan-Shaolak Fanm& Bulambai Canal (Tashualkul) Dzhambyl 2671 6391 639 596 596 Soil salisszation asd wvater lagging Land reclasratson is requsred 14 Lenin Farsas (Tashulkul) Dzhambyl 1809 1809 1809 1031 1031 Soil salsnszatian and water loggissg land recidlaiatoun is required 1 Kuralbek Farm I)zhambyl 574 574 574 Reconstruction of irrigation systcm is needed to sncrease "atcr supply 16 Zharkyn Farm Semes 650 650 650 Construction has been stopped 1770 Years October Farm Seme| 100Im 1000 1000 Cosisiruction wasn't completed 18|Furmanova Farm SenTcki 857 857 857 Coriustuction wasn't completed 19 Zhaknses Farm (Koksu) Taldykorgan 679 679 679 399 399 Reclamative snspsvemnen ol'irrigated lands is required 20 Mezheros Farm (Koksu) I'aldykorga | 380 381 381 Reclamasive isiprovemesis ol strigated lands is required 21|ralapty Farm l'aldykorgan 295 295 225 70R eclamative isssprovensent of irrigated lasds is required 22 AkLosisnski Farm Zhezkazgais 142 428| 240 1188 14281 | 428 SosIsalsnszatson land reclasisatson is tequired Sub,total 13031 10630 5076 5554 0 5794 0 4167 1627 I otal 34782 19224 11072 8151 0 2594 1069 ( 10467 10058 I I .. .. . I I I-- = I 1 1. 1 1 -. 1. . iD - 70 - Annex I REPUBLIC OF KAZAKsTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT DESCRIPTION OF SUB-PROJECTS FOR YEARS ONE AND Two A. Sub-Projects for Year One Chingeldy Joint Stock Company (Pump Station #2), Chengeldy Massif, Talgar District, Almaty Oblast. 1. Comprehensive reconstruction of 2,368 ha of on-farm irrigation systems and 600 ha of new drainage for the same area on one farm. At present 150 ha are out of production because of salinity and water logging. The system was originally constructed in 1975 and is located 40 km from Kapchagai. Major crops are onions, vegetables and fodder crops. Water is currently pumped out of Kapchagai Reservoir from pump station No. 2. The pump station has sufficient pressure but insufficient discharge capacity to serve the full 2,368 ha. Proposed work includes reconstruction of the pump station (5 pumps), partial replacement and reconstruction of the two parallel main pipelines (3.5 km / 7 krm), and partial replacement and rehabilitation of the existing ferrocement flume distribution system. A small night storage reservoir is being proposed. Polyethylene closed pipeline systems are to be constructed to deliver water to the fields. It is expected that the system will remain under surface irrigation. Land leveling will be carried out where required. Drainage works will include construction of subsurface field drains (150 m to 200 m spacing) and closed collectors. Drainage flows will be managed using a combination of reuse and recycling, evaporation ponds and discharge into Kapachagai Reservoir. Kyzi-Agash JSC, Kopalskiy District, Taldy Korgan Oblast 2. On-farm irrigation reconstruction on 1,415 ha . The system was a non-technical system originally constructed in the mid 1960's and is located 49 km from Taldy Korgan. Major crops are potatoes, vegetables, sugar beets, and fodder crops. Water is to be diverted from the Kyzi-Agash River at a location 10 km downstream from the newly constructed Kyzl-Agash Reservoir completed in 1990. The diversion structure originally designed to serve 7,800 ha was started in 1991 but never completed because of lack of funds. A 2 km inter-farm closed pipeline system (two pipes; diameter 400 mm) will convey irrigation water. Proposed work includes upgrading the surface irrigation by replacing the existing earth network with a closed pipe system under gravity pressure and providing hydrant turnouts down to 15 ha. Surface drainage water is discharged into local depressions. Verfical Drainage, Golodnaya Steppe, Makhtaral District, South Kazakstan Oblast 3. Rehabilitation of 70 vertical drainage wells on 7,777 ha out of 43,288 ha. This area was selected because of salinity problems. The system was originally constructed between 1968 and 1972 and is located 40 km from Tashkent. Major crop is cotton. Average depth of wells is 60 m (average drain discharge is 40-601/s) each serving, 110 ha. Drainage return flows will average 41.2 MCM/year. Proposed work includes replacing existing wells with new wells, including drilling of new wells, installing piping, access roads, dismantling old wells, and providing new power lines. All drainage will - 71 - Annex I be conveyed to existing collectors and into the Arnasay depression (58 percent) and Syr Darya (42 percent). Mirny Farm, Moledezhnyi, District Karaganda Oblast 4. Reconstruction of 835 ha of an on-farm irrigation system and construction of new drainage on 498 ha for a separate area which already has 50 ha of existing drainage. At present 663 ha are out of production because of salinity and alkalinity. The system was originally constructed in 1980 and is located 90 km from Karagandar. Major crop are potatoes and fodder crops. Water is pumped from the Irtysh-Karagandar Canal and conveyed through a closed pipe system (a maximum of 10 km) to several booster pumps. Proposed work includes replacing the main above ground steel pipeline with buried pipe (8.7 km), replacing the thin walled steel pipe distribution system with concrete and steel pipes, and replacing side roll with center pivot sprinkler systems for 835 ha. Subsurface drainage works (60-100 m spacing) are to be constructed on 448 ha, including rehabilitation of drainage on 50 ha. A closed collector system will convey water to Kokebai and Gayazurkin Rivers. Akkumnsky Farn (Pilot Demonstration Rotation Block #6), Dzhalagash District, Kzyl Orda Oblast 5. A two field rice and 4 field lucerne rotation is to be introduced on 1,069 ha. This block now has six crop turn rotation fields that rotate three rice and three lucerne crops. Original system was constructed in 1963 and is located 60 km from Kyzl Orda. Water is diverted from the Syr Darya River at the KyzI Orda diversion barrage into the Left Bank Main Canal and conveyed to the Akkumsky farm turnout. Proposed irrigation works include rehabilitation and partial lining of the existing earth canal on- farm delivery system and reconstruction of the existing on-farm collector drain system. Drains will discharge into the North Collector Drain (Left Bank). Pritobolsky Joint Venture Farm, Kostanay District, Kostanay Oblast 6. Complex reconstruction of 850 ha of an existing on-farm irrigation system and 320 ha of new drainage for the same area. At present 320 ha are out of production because of water logging. The system was originally constructed in 1975 and is located 10 km from Kostanay. Major crop are potatoes, vegetables, and lucerne. Water will be pumped from Tobol River directly into a closed distribution system and conveyed a maximum distance of 8 km. Proposed work includes construction of a stationary pump station at the Tobol River and installation of center pivot systems. Subsurface drainage will be provide for 320 ha and a 2 km drain will convey drainage flows back to the Tobol River. B. Sub-Projects for Year Two Zhambyl Farm, Tashutkul Massif, Chu Distract, Dzhambyl Oblast 7. Comprehensive reconstruction 1, 144 ha and new drainage on 654 ha of this same area. The new works are within the boundaries of the existing irrigation system. No area is out of production because of salinity and water logging at this time. The system was originally constructed in 1941 and is located 10 km from Chu. Major crops are sugar beats, vegetables, melons and lucerne. Water is diverted from the Chu River 8 km below Tashutkul Reservoir at the Tashutkul Diversion works, into the Right side main canal (unlined; serving 3,805 ha) to one of the four on-farm turnouts which serve Dzhambyl JSC Farm serving 654 ha. The Tashutkul Main Canal, a separate source of water diverting - 72 - Annex I directly from Tashutkul Reservoir delivers water to an on-farm turnout which serves 480 ha on Dzhambyl JSC Farm. Proposed work includes providing lining and constructing parabolic flumes for the existing irrigation distribution system and upgrading and constructing new works to provide surface irrigation down to 15 ha. Drainage works will include construction of 6 vertical wells up to 40 m depth, with an average discharge of 50 I/s, and serving an area from 75 to 160 ha. and /or closed horizontal drainage. Closed collectors will be constructed to convey the drainage flows back to the Chu and Kookiest Rivers. Prirechny Farm, Zhanasemei District, Semei 8. Reconstruction of an existing on-farm irrigation system on 913 ha. The system was originally constructed in 1980 and is located 15 km from Semeipalatinsk. Major crops are potatoes and maize. Water is pumped from the Irtysh River directly into the Prirechny on-farm canal and conveyed a maximum of 9.5 km. Annual irrigation requirement is 4.5 MCM and diversion discharge is 1500 I/s. Proposed works include construction of a new stationary electric pump station, a transmission line, a small storage reservoir to serve the lower 313 ha., and replacement of existing side roll systems with center pivots on all areas. Natural surface drainage is to the Irtysh River. 60 Years of October Farrm, Aksusky District, Paviodar Oblast 9. Land reclamation improvement which will provide new drainage for 4,882 ha out of 5,286 ha of which 96 ha are out of production because of salinity problems and 913 ha because of waterlogging. A working drainage system already serves 404 ha. The major crops are potatoes, vegetables, and fodder crops. The system was constructed in 1978 and is located 79 km from Pavlodar. Drainage return flows will average 3.64 MCM/year. The existing sprinkler irrigation system is working satisfactorily. Subsurface drainage will be constructed. Drainage will be collected and conveyed to a pump station (8 m, 780 I/s) and lifted into a collector drain that will convey flows 10 km to Karosol Lake. - 73 - Annex J REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT AGRICULTURAL DEVELOPMENT COMPONENT 1. To justify the investments in irrigation and drainage rehabilitation in a large number of large-scale farming enterprises, the economic productivity of these farms have to be increased. To this end, an Agricultural Development Component, as reflected by the proposed "Farmers' Participatory Training and Information Services Pilot Program", has been included in the IDIP Project to intensify and improve present agricultural production systems and facilitate even further the commercialization and privatization of those farms which have been selected for rehabilitation of their irrigation and/or drainage systems. Under this pilot, an embryonic extension service in the Ministry of Agriculture (MOA) will be set up and tested through a "Farmers Information Services Desk", which will eventually reach a much broader agricultural community through video, radio, TV, technical brochures and a 'Farmers' Weekly" paper editions in Russian and Kazak languages. 2. It is foreseen that after the pilot phase, a national Agricultural Services Project might be developed, covering not only irrigated, but rainfed agriculture and rangelands management as well. Under this follow-up project, it is anticipated that a more farmers' oriented (public and private) agricultural research and extension services system would emerge. 3. The main elements and base project costs of the Farmers' Participatory Training and Information Services Pilot Program, are: (a Participatory Training: US$180,000; (b) Demonstrations: US$160,000; (c) Farmers' Information Services: US$470,000; and (d) Consultancy Services: US$1,125,000. Farmers' Participatory Training and Information Services Pilot Program 4. The program consists of three main activities: (a) training of specific target groups, in various agro-technical fields and commercial farm management; (b) demonstration of improved and modern technologies to increase production, improve water use efficiencies and reduce environmental degradation; and (c) provide relevant information through different means (pamflets, video's, radio, tv, weekly papers) to farmers to advise them how to make their farms more productive and more sensitive to emerging market demands. 5. For this last aspect, a Farmers' Information Services Desk will be set up in MOA. Participatory Training 6. The training program and information services should be oriented towards solving farmers problems and to facilitate the privatization and commercialization of the farms. Such training is not currently provided by the traditional education institutes and requires therefore special training of the trainers. Therefore the training program will start with the "Training of Trainers" from MOA, the - 74 - Annex J Kazakstan Institute of Management Economics and Strategic Research (KIMEP), Universities, and other institutes and participating individuals. A selected group of individuals, as well as the consultant's local counterpart staff, will be trained in modern training approaches and methodologies by the project consultants, in order to become "Facilitators" and "Trainers of other Trainers" at the same time. Under the supervision of the Project's Implementation Unit (PIU), local technical staff and consultants of MOA and the former Academy of Agriculture Science (AAS), now under the National Academy of Sciences, and with the assistance of international training and farm management consultants, the necessary training modules for the four identified target groups will be developed and used by the "Trainers" and consultants themselves. These modules will be mainly elective short courses and to be modified when necessary to suit the participants' needs best. Initially the primary responsibility for the quality of the training program will be with the consultants, assisted by PIU and relevant training counterpart staff in MOA. This responsibility, however, will be gradually transferred within two years to a more permanent training set-up/unit within MOA . 7. The four target groups and their specific training needs are: (a) National. Oblast and Raion government staff involved in the project will be receiving the necessary basic orientation and training to implement the project successfully and assist farms in their efforts to become more economic farm enterprises and thereby making agricultural production more sustainable under the prevailing conditions, and helping the process of farm restructuring; (b) Farm Directors and Managers of Joint-Ventures and Cooperatives in the project will receive training specifically in commercial farm management, accounting and agro-business and be subjected to discussions on case studies how to start their own private business in the presently non existing agricultural inputs/outputs and marketing services sector. This target group is considered to have the most potential candidates for establishing such a private agricultural services sector in Kazakstan. In some parts of the country, some farm managers are already attempting to realize this approach by establishing national and international market contacts and organizing the collection and transportation of wheat, milk and onions (Chengeldy) to the prospective clients; (c) Technical Farm and Production Specialists, Brigade Leaders in the project will receive extra training on the application and transfer of improved and new technologies to farmers to increase production in sustainable ways and will be subjected to discussions on how to establish their own private agricultural consultancies. It is expected that members out of this target group will form the source of specialists for the eventual private and public extension services in the country; and (d) Individual Private Farmers and Farm Workers will be the biggest group benefitting from the participatory training. Since most individuals from this group have mainly high school education and only limited skills as farm hands, tractor drivers, herds men, milkers, mechanics etc. they need the broadest training in technical crop and livestock production and basic farm management. In the short term, they would remain dependent on the advisory services of the technical - 75 - Annex J specialists and the Farmers Information Desk Services of the MOA. Eventually, independent private farmers would emerge from this group, while others would be quite happy to remain farm hands or otherwise. For this group, short training courses of several weeks each would be channelled as much as possible through existing agricultural training facilities in winter time and "on-farm" evening or week-end classes in summer time. They would particularly benefit from the scheduled on-farm demonstrations. Training Courses 8. The specific special Training Courses, number of beneficiaries and their costs for the various groups as described above are shown in Tables 1 to 3 for three consecutive years from 1996/97 to 1998/99. These tables provide a menu of courses from which the most relevant ones will be selected for the various different groups of beneficiaries. It is envisaged that at the end of two years of implementation and monitoring, the whole training program and its costs will be reviewed in a workshop organized by the consultants (before their departure) with MOA/PIU, to include lessons learnt by that time and to make the program more applicable to reach a larger segment of the farming communities, specialists and agricultural entrepreneurs. This updated training program could then become part of a possible national Agricultural Services Project. Under the IDIP project, however, it should be realized that the three elements of training, demonstrations and information services will be totally integrated into one approach and action plan towards the participating farmers in the project, and in coordination and synchronization with the implementation schedule of the irrigation and drainage rehabilitation activities in the sub-projects. 9. The total base training costs over three years, including those for travel/transportation. accommodation, meals, training materials and local trainers fees (US$20/day), have been calculated on the basis of the cost estimates in Table 4, while for new training equipment an additional US$36,000 is required. Tables 4 and 5 indicate the separate training costs per person day and the training equipment items to be procured. However, most training activities will be carried out under the ministry's regular training program and where possible charged to the beneficiaries, thus reducing the training costs to the project considerably to about US$144,000. In cases where farmers are not able to pay for the special course expenditures, the ministry will bear the extra costs under the project up to US$144,000. including the fees for 2000 trainer-days. In total some 46,000 beneficiaries are targeted for special training under the project. MOA would also be responsible for the provision of transport, where necessary. Under the project, the ministry will be reimbursed by the Bank for the above mentioned extra costs on the basis of Statement of Expenditures (SOEs), while the procurement of additional training equipment will be done locally by PIU on the advise of the consultants. Demonstrations 10. As part of the technical training and to increase production, new and improved local crop production technologies for major crops (cereals, sugarbeet, onion, maize, sunflower or other oilcrop, potato) will be demonstrated in selected sub-projects and on demonstration farms. The objective of the demonstrations is to teach farmers to evaluate improved practices/machineries and become more self reliant and commercially oriented. These demo's would make use of special equipment (local improved and imported) already introduced and (partly) fabricated by the private sector in some parts of the country, including the use of the latest generation of fuel efficient 4WD tractors. In some cases, private - 76 - Annex J companies might be invited to demonstrate new production technologies. It is estimated that some 50 demos of 10 ha each (to a total of 500 ha) will be organized over three years (e.g. 10-18-22), applying economic optimal rates of agricultural inputs of fertilizers, seeds, agro-chemicals and fuel. Better on-farm water management practices will also be demonstrated, including some improved sprinkler components. Table 6 shows the estimated base costs of production inputs per ha for various crops, which vary from US$1 10/ha for cereals to US$2,275/ha for potatoes. Assuming that the onion and potato demonstrations will be carried out on a much more limited scale as compared to the other crops, the average base costs of production inputs per demonstration of 10 ha is estimated at US$3,200 or some US$160,000 for 50 demonstrations over 3 years. Where justified, demo's can be smaller or larger than 10 ha. Extra financial benefits to the farms, as a result of the demonstrations, will be ploughed back and used by the farms themselves for further adoption of the technology in the subsequent years' and to gradually buy the recommended equipment and crop production inputs. 11. The demonstration plan for each year indicating what type of demo and how many will be where executed, will be drafted and monitored by the consultants and training team, together with PIU. These plans will be developed in consultation with the sub-project Farm Boards and WUAs, who will then execute the demo's themselves as much as they are able to do. In other cases, some farms may need more direct assistance from the consultants and MOA to set up a viable demo. PIU/MOA, however, will remain responsible for making available the necessary demo equipment and for the procurement of the necessary production inputs as recommended by the team. The consultants will also be responsible to organize "Farmers Field Days" on the demonstration sites in consultation with the farmers concerned and those nearby. These field days should be held at least once per cropping season at the most appropriate time to maximize the demonstration effect of the practices recommended and shown. At these field days, the demo's will be evaluated in comparison with existing practices and analyzed for their cost-benefit ratios. New successful practices should be widely publicized by MOA's Farmers Information Services Desk through the common news media and "Farmers' Weekly" news paper editions for broader adoption. Farm demo production inputs will be procured through prudent local or international shopping. Farmers Information Services Desk 12. In conjunction with the training and demonstration components, there is a crucial need for farmers' information on many agricultural issues, in particular by emerging farmers. Up till now, however, this information has not been readily available and accessible by the smaller private farmers, in particular information on more efficient crop and livestock production technologies, farm management and accounting practices and market information. Most information in the past came from research institutes directly to the farm directors and specialists, who applied the recommendations by order of the State. However with the on-going privatization and farm restructuring, the need for broader and more farmers' and markets' oriented information has increased considerably. To meet this need, MOA will establish a central farmers' information services desk under the project to provide regular information on critical agricultural issues related to production and marketing through the existing news media of TV, radio, video, brochures and "Farmers' Weekly" paper editions. 13. The agro-technical topics and contents (copy) for the broadcasts and papers will be generated by the consultants and technical specialists of MOA and staff of agricultural research institutes, who will pass it on to the newly established Information Services Desk and the MOA Press Center. This center has already experience in providing TV and Radio broadcasting to farmers and is very eager to - 77 - Annex J participate in the Project. It also prepares press releases on behalf of MOA. Under the project, page space will be bought for the "Farmers' Weekly" edition on a weekly basis for three years from the two (poorly) existing private agricultural papers "Selskaya Nov" (Rus.) and "Auyl" (Kaz.), which are now sold in only limited numbers (resp. 18,000 and 3,000 copies/week). It is foreseen to distribute these papers to all agricultural education schools as well to be used as training material. Eventually sufficient agricultural information will be readily available to farmers so that these papers do not need direct support from MOA any longer but take over the full responsibility of publishing all the demanded farmers' information themselves. 14. Under this component special equipment (estimated at US$30,000) is required to upgrade the present MOA Press Center's facilities, including those for the preparation of video's and technical bulletins. Table 7 shows the breakdown of requirements and base costs to a total of US$470,000 over three years. Training videos will be prepared locally, reflecting the basic thrust of the training program and broadcasted through MOA's regular agricultural transmission hours. The procurement of all the equipment and materials will be carried out through Local Competitive Bidding procedures by the consultants with the assistance of PIU. Technical Assistance and Consultants Requirement 15. To implement the Farmers' Participatory Training and Information Services Program, the PIU is assisted for two years by international farm management and agricultural training consultants and local specialists or consultants. Under the project a total of US$1.1 million will be available to cover the base costs for some 50 foreign and 250 local consultants man-months to implement the Pilot Program. The consultants will be fully responsible for all the training, demos and technical farmers' information services within the first two years of the project, after which the responsibility for the daily implementation of the program is transferred to MOA and the consultants. Local specialists/consultants may be subcontracted in consultation with PIU under Kazak salary guidelines, norms and conditions. The foreign lead consultants will also be responsible to train their local counterpart consultants and continue to provide their services up till the end of the second year of the project. Table 8 gives a breakdown of the expected foreign and local technical expertise required. - 78 - Annex J 16. The overall base costs for the whole Farmers Participatory Training and Information Services Program is estimated at US$1.935 million as shown below. Farmers' Participatory Training and Information Services Pilot Program Overall Budget Requirements (US$ '000) Item Year I Year 2 Year 3 Total Training Equipment 36 36 Courses 44 50 50 144 Sub-total 180 Demonstrations Equipment: made available Production Inputs 30 65 65 160 Sub-total 160 Information Services Equipment 30 30 Videos/TV 30 50 50 130 Brochures 50 75 75 200 Farmers' Weekly 30 40 40 110 Sub-total 470 Technical Assistance Foreign (estimated 50 manmonths @ $ 20,000) 500 500 1,000 Local (estimated 250 manmonths @ $ 500) 35 45 45 125 Sub-total 535 535 45 1,125 Total | | | | 1,935 REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT FARMERS' PARTICIPATORY TRAINING AND INFORMATION SERVICES PROGRAM TABLE 1. TRAINING PROGRAM: YEAR 1 (1996-1997) l ~~~~~~~~Traiune TOWd TOW Coure r.de/rramig Sibjed Trget GrCp (Traeasc) rTo No Scope of Trainig Per Corme Duradon No of Traini M.D. Locao m Trairrs Coat of _ Iainee (Days) Cours Ds (es) (1 T __ _2 3 _ 5 6 7 8 9 Is 12 Truning of Trancm MOA, Academy of Agric Pricipaive trainirg (2 gros mansentTechv) Science, KLMEP 10 techniques 10 3 2 6 60 ACrnaty onsul 1,030 Desp Instiute MOA staff (Republic. obia, IDIP Oriaon rmirn) 60 Projecd avis 20 I 3 3 60 Aimdy Crsidani 660 Nat Farmcr Associaion Farm busines plawi. Bwlgeir Fnc Masgaot Farm Mangrjnt Farm Ml d rectuu -aecounting Consltan 40 -credit 10 15 4 60 600 Ainaty Train 19,200 Mrketing MOA ____ ____ ____ ____ ____ ____ ____ ___ ____ ____ ____ ____ ____ ____Business altenatives MOA (repubhc) Food cups Conultants Crop Proditton Oblast 60 Fodde crops 20 3 3 9 ISo Almaty Traners 5,520 RUM Home gardens MOA Land use Ac A Sc MOA (republic) hUec control, Nematodes lntated Pest Management Obbta 30 Plat diaia. Weed control 15 3 2 6 90 Almity Consuiais 2,520 Racn Pest es ObIss Trauies Bioogical elements MOA Mositonn&g Envisupeia- Safety prectiion MOA (republic) Harvesting tch Almt,y Consultant Cop Haveig Oblest 30 Storage tech 15 3 2 6 90 ObLsts Trarin 2,820 Stor4ge & Plocessing Ram Processn tech MOA Steps in M ichrism Fnrm Mednruzetion MOA (republic) 30 Tirne&power req 15 2 2 4 60 Alnaty Consultas 1,U80 Oblas New tech h&iquwneu Trauners Raioi Fuel efficiencies MOA MOA (republic) Beef production Alnaty Consultants Anmal Productuon Oblast 40 Milk productIon 20 3 2 6 120 Sub-proect Tainesi 3,720 Raion Sbeep production MOA Pouluy production Rne Managenent MOA (republic) Pasture egablishrnent Almaty Consultants Obl t 20 Pasture nuanaemnent 20 2 1 2 40 Sub-project Tratners 1.240 Ra;on Grazing techniques MOA Stocking rates Soul conzeivsclon Water conservation X _ _ __ _New technologies Sub-Total 320 21 102 1,300 39,000 TABLE 1. TRAINING PROGRAM: YEAR 1 (1996-1997) Toal _Toti Cos Cos TrWFr.im., Sabjed Target Group Toal NO Scope of Traiing Traiees | Duraa No of Trainsg M.D Loation Traimre (VSD) (Troa) of Pdr COWr | (Days) Cos Days (6x7) (538) Traimen _____________ _ 2 T a Sn 6 7 9 _ 1 . 12 Inrodictiona to Irtmtion MOA (republic) Buic tenar sod clo4 i __ Cctuulu Oblut 30 Soi & Water 15 2 2 4 60 Alnuaty Trainees 1,830 ___ __ __ __ __ __ __ __ __ __ __ __ __ _ __ __ __ __ __ __ __ __ _ ___ __ _ _R_ _o__ __Su-projeto M OA_ _ _ _ _ MOA (repjblic) Basui. Furrow, Border, Imgacie MeUks Oblut 30 Sprinkler. Drip. Choosis a I S 2 2 4 60 Al-sty COnsultAs I,SS0 R"ion riod Sub projec Trmea MOA (republic) I30 igation schedutling ObILst 10 fnucmeofwatersbronagesr IS5 2 2 4 Alesay Consultants 1.330 On FPam Waer LMnageaent Raion yiclds 60 Sub-project Trainers MOA (republc) Principles D gr Obla-t 20 Probkm idatin nsu 20 2 I 2 40 Alrnaty Consultants Raion Mauroruig dinae condition Sub-project Truaners 1,240 O&M procedwe MOA Vertical wells ud subsurface __ _ _ _ _ tiles__ _ _ _ __ _ _ _ __ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ MOA (republic) Neods, Prinniples & practices Optioc & Maintenance Oblast 30 Orgpnrztion 15 2 2 4 60 Alnaty Consultants 1,880 R an_ Tranenrs MOA I mtion Orgnizzauon & Fnner MOA (Republic) Legal aspcts of WUA esibl 20 2 2 4 S0 Almnly Cnuntrs 2,480 Participation (Oblast, Rayon) 40 Organizational alItenAves a O WUAs. Establ. & enfcwcing by - I S 3 3 9 162 Sub-Projects CTr50t4 Farrn Maneganed 36 Laws in WUAs, O&hu Specialist War shes & wale fees Trains 60 Waer rotalirs & adiedules 20 3 3 9 1I0 Sub-Projects Caiantu 5,5S0 FaDrr Conflict rasr nst, Staff 45 recruirnent&supervision. 1 3 3 9 135 Sub-Projecu Tim 4,230 Liiationwok r Consakants Specialists Food crops Cmp Prodciason Brigaduers 50 Fodder cops 25 2 2 4 100 Sub-Projes Traners 3,030 Local gm Houne prdees Consulinss Non-M _ _ Land use Specialists Ins% conLrol. Nematodes Intusted Pest Managmet Brigadiers 20 PlanA diseases, Weed conrol 20 2 1 2 40 Sub-Projects Traines 1,240 Local govt Pest residues Consultants Non-govt Bliological elements Moruit Env aspects Safety precutions Sub-Total 391 23 55 977 30,410 TABLE 1. TRAINING PROGRAM: YEAR 1 (1996-1997) _ _. _ I r . ._. I I r>~~~~~~~~~~~~~~~~~~~~oid _t recoo Cor rraeuuT-mimg Sabjecr Trgt Groip (raTe-) Total No Scope of Trainig P| Course D.ration No of Traoning MD Locaion Train (USD) ofT rine V S (Dart) Cowrss Days (67) (SeJ) 1 I 2 3 4 _ 5 6 7 a 9 10 11 12 Specialists Hervcxtug tech Crop I arvestung. Brpdicrs 20 Storage tcch 20 2 1 2 40 Sub-Projects Trunes 1,240 Storep & Processing Local govt Pro&c sng tech Consultan ______ _____ _____ _____Non-g mv _ _ _ __ _ _ _ _ _ Speciallst Stesi Mehnit Farm Mechaunzat Bripdien I 3 TueApower reg 9 2 2 4 36 Sub-Projects Traters 1.160 Loal4 goW. New IO&*qWppcaI Consultwnt Nr-9t Fuel cfitnciemics _ _ _ _ _ _ _ _ _ _ _ _ _ _O&M _ _ _ __ _ Specialsts Bccf production Anunal Production Bripadrers I Mlilk production 9 3 2 6 54 Sub-Projecs Trauws'.. 1.740 Local govt Sheap productron Coulta Non-govt PouIiY production_ Pasture establislhmernt Spmealists 26 Puture mngement 13 2 2 4 52 Sub-projects Tramers 1.640 Rag Managerent Bradmes Grin tech Consutausi Lo l gv stoclng rates Non-Wvt Soil coniavation Waer consevabon New t-hnolegis Sp- nption methods On Fim Waer Mmaganag Bngadicrs 32 Water scheduling 16 3 2 6 96 Sub-projecu Truners 3,000 Local gvt. Draunae CosultAS Non-gvt O&M Ncnwvl OkM ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~00 Mdlodolo dev. Measuirement irdicators Trainer ML itm & Evaluton MQA (repLabblc) S SanMplig reacy 5 5 I 5 25 Consulnta *50 Suvey reqra AIaty Data collection Daut Alysa Manages bligation and EnSiaonmal nalysi of Dnwe uaff 5 awioiltrl project 5 5 1 5 25 Alnaty Truiners 850 Enviro al staff Conmtu Mmus itigtion Nd How to apply cav. panli to Ewvronmeal Concen Drage staff Environm al 15 farm masaonr t 15 I I I t5 Oblat Tranes mtff Consultas 170 Mmagemnt of urWaon and draime systean & fnm, Fmerm 600 chemical 200 1 3 3 600 Sub-Projecta Traiers 6,060 Consultas 739 Sub-Toal t 36 761 10.930 Grand Total 1,450 59 193 3,220 86,120 .- KAZAKsTAN: IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT FARMERS' PARTICIPATORY TRAINING AND INFORMATION SERVICES PROGRAM TABLE 2. TRAINING PROGRAM: YEAR 2 (1997-1998) Tri"n Told_ ToWi Ceursa 7dTrl rg Srectbe T-Set Group (Traee) Totel No Scope of Trainisg Per Coure Duration No of Tr/inuir flD Locatdon Trainr Coat _____________________ ± 2 J 2~~ofnais L Couse D -vs (W )7 J. AI ______________2 __ T r _ _ _ 6 7 1 e 11 __ 12 Speciwali Food aFqp Crop Production Brpdien 112 Foddercrops 1 6 3 7 21 336 Sub projets Traine 5,376 Local govt Hane grdens Consultants Non-pvt Land use Specialists Insect cotrol, Nemnaod Ired Peat Manag t Bripdiers 56 Plant disaa, Weed coatrol 14 2 4 8 112 Sub-projecs Traier&i 1,792 Local govt Peat residu Consultants Non-govt Biological elemeis Monitoring. Envaspects Safety p autins Specialits Harvesting tecL Crop H etuia Bngadiers 56 Stooe tech. 14 2 4 8 112 Sub-projects Traioers 1,792 Srcag & Processing Local govt. Procsing tech ConsultaUs ___________ __________Non-S mv. _ _ _ _ _ _ _ _ Specialists Ste in Mesiaior Farm Medaniztion Brigadien Time&power req. 10 2 4 8 go Sub-projects Traines 1,280 Local gavt 40 New lech. equjOCi Consulunu Nn-govt. Fuel efficiencies O&M Specialists Beef production 00 Animal Production Brigadias 40 Milk production 10 2 4 8 80 Sub-projects Traune 1.280 Local govt Sheep production Caonsults Non-govt Poultry production Pasture establsment Specialits 60 Pasture tanagement I 5 3 4 8 120 Sub-projects Traners 1,920 Range Maament Bndiens Grazing techniques Consultnts Local govt Stocking rate Non-gt. Soil conseavabion Water coservation New technologis_c_______ On Farm Wate" Ma ent Spacialis urrtihon Meiods Brigdiers 60 Water shchduling 15 3 4 12 ISO Sub-projects Tranes 2,880 Local govL DraAge Coasultants Nont iOM Lega axpeds of WIJA estab. nrriution Organization and Fannen Or& altrnatves in WI/A Trainers Participation Farm Managers Specialits 7 Estab. & enforcing by laws in 7 3 I 3 21 Sub-projects Consultants 336 WIUAs Fames 140 O&M 20 3 7 21 420 Sub-projects Trsamn 6,720 Water shares & water fees Coraultants Lngastion workers 35 Waer rotations & schedules 5 3 7 21 105 Sub-projecu Conflict maL _'nag . Trauners 1680 Staff recruitment&supervision Consultant Sub-Total 606 j 46 118 1.566 2j.056 - 83 - Annex J _- < '. 1 ; t ~~~~~~~~~~~~~~~~~~~~~~~~.1 i 30 -. 0y l, - KAZAKSTAN: IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT FARMERS' PARTICIPATORY TRAINING AND INFORMATION SERVICES PROGRAM TABLE 3. TRAINING PROGRAM - YEAR 3 (1998-1999) Trainees 1 TOtWl 1 1 Coarse rideTraimag Subjea Targat Crp(Traainere) ToaiNo ScoeP of Traiuing Per Duration No of Traiwng M.D Locaro Trainers ToalaCot of Trea ineesICourt (D ys) Courses Days (dx)7J (5xs) (USDJ 2 3 _ 1 5 6 7 S J 9 10 11 12 Specialists Food cops Crop Production BnoAdies 160 Foddercrops 16 3 10 30 480 Sub-projecs Truner 8,230 Local govt. Home garden Consultants Non-gt. Lnd use Specialists Insect control, Nematodes Integried Pest Maagemnent Bngadiern so Plant diseas, Weed control 16 2 5 10 160 Sub-projects Traun 5,000 Local govt. Pest residues CoriOultant Non-got. Biological elments Monitorig. Env.aspects _ _ _ _ _ _ _ _ _ _ _ _ _ _ ___ Safety precasmns_ Specialiss Haervesting tech. Crop Harvesting. Bngadier: 70 Storage tech. 14 2 5 10 140 Sub-projects Tranes 2,440 Stge & Processing Local govt. Procing tech. Consultants Non-awt. Specialiss Step in Maiczn.m_ Fam Mechaninlion Brnpdien 70 Titehpower req. 14 2 5 10 140 Sub-projects Tramne 2,440 Local govt New tedv& elinlt Cosiultants Non-govt Fuel efficiencies O&M_ __ __ Specialists Beef production Animal Production Bngpders 80 Milk poduction 16 2 5 10 160 Sub-projects Trainers 2,440 LocAl govt. Sheep producton Consultants Non-govt. Poulty productionr Pasture establishment Specialiss so psture maonelnt 16 2 5 10 160 Sub-projects Traners 2,760 Rage Manae Brigadiers Grazing techfniques Consultant Local gov. Sting raes Non-govt. Soil consrvation Waer conservaion New technologies On Farm Water Mana ent Specialist Irgation Metxso Brigadien 80 Water scheduling 16 2 5 15 240 Sub-projects Trainers 4,140 Local govl Drane Consultt Non-gr. O&M Legal pec of WUA earab. Irrigation Organuzation and Fanners Og. alteratives in WUAs Trainers Palticipation Farn Maaagers 60 Estab. & enforcing by laws in 6 3 10 30 IS0 Sub-projects Consulbtan 2,400 Specialists WUAs 200 O&M 20 3 10 30 600 Sub-projects Train Farmers Waer shares & waer fees Consultant 6,600 50 Water rotations & schedules 5 3 10 30 150 Sub-projects Lrigalion workers Conflict mangement. Trainers 2,100 Staff recruitmentcsupervision Consultanus Sub-Total 930 70 15 2,410 38,600 - .. C _ _ _ - TABLE 3. TRAINING PROGRAM - YEAR 3 (1998-1999) I I ~~~~~~~~~~~~~~~~~~~~~~~Tosal TOWa COX, Coanr TeLruTainTgn Subjed | T et Group Tot4 No scope of rranin Traine Prr Awaiti No of Training MD. Location Trains (IISD) (Traoine) | of Coui PDays) Corses Days (&x7) (54) jTraiena I - - 2 I J4 5 6 7 a 8 le 11 12 Farm buh_ . Farm Meagrmcnt Farm Mngas/lt)rinct Budgeti% FmncW C tnu 40 U-tamPn_t 10 15 4 60 600 AJDUy Traners 19,200 -TDO%" MOA lratives . F.m Marac-cat * crop foationu Qawal Fmniig Small Fas 2.,(0 Imcrautd pea 25 10 S0 S00 20,000 Sub-Projects Taunes 216,000 Farm weckkrs M iriap Conultants FarM m.dmu ion Anumad Proubction _ _ _ _ _ OFWM EwvrumLal Coaocns Mm M l1ti and . Envir i aldo Dra_na Staff onalysisof 5 5 I 5 25 A1-y Traners LA Enwonmanl Staff auicu ll project Canultn I50 M _aC 11iaI aI If How to apply env. 15 I I I IS Oblast Tratn 470 Dlrarnp Staff nalysa to fam Culta E.uviinn al Staff manapOsunt Taimnees Famers 1400 ManeMent of 200 1 7 7 1.400 Sub-Projects Consulan 14.140 figaton andS _____________________ & ~~~~~ ~~~~~farm chemicals __ _ __ _ _ _ __ _ _ _ _ _ _ _ _ _ _ Sub-Towl 3,460 93 73 22.040 250.060 Sub-Total; 4,390 163 1.058 24.450 288,660 X - 86 - Annex J TABLE 4: FARMERS' PARTICIPATORY TRAINNG AND INFORMATION SERVICES PROGRAM TRAING COSTS Training costs have been calculated on the basis of the following: (a) accommodation (b) meals (c) transport (d) training material (e) trainers (local) A. Training costs per person per day have been calculated on the basis of the following three scenarios: In thousands 1. Accommodation 1,000 Meal 500 Transport 200 Training Materials 300 Total 2,000 = $30/person/day IL Meal 500 Transport 200 Training Materials 300 Total 1,000 = $16/person/day III. Meal 500 Training Materials 130 Total 630 = $10/person/day B. The costs for local trainers has been calculated at $20 per training day. The above costs have been used to estimate the total cost for each training course. - 87 - Annex J TABLE 5: FARMERs' PARTICIPATORY TRAING AND INFORMATION SERVICES PROGRAM Training equipment required for implementing the IDIP training programn are as follows: ( Item _ Unit Cost (US$) Total Cost (US$) Desktop Computer (Pentium) 2 2,000 4,000 Laser Jet Printer 1 2,000 2,000 Scanner 1 1,500 1,500 Photocopier 1 5,000 5,000 Overhead Projector 2 500 1,000 Video Camera (VHS) 2 1,500 3,000 Television 24 300 7,200 Video Cassette Recorder 24 200 4,800 Video cassettes 200 40 8,000 35 nmu autofocus camera 2 300 600 Slide projector + Screen 2 700 1,400 Whiteboard 5 30 150 Flip chart 5 50 250 1.4 kw petrol generator 1 1,500 1,500 Total 36,000 TABLE 6: FARMERS' PARTICIPATORY TRAINANG AND INFORMATION SERVICES PROGRAM DEMONSrRATION: ESTmATED COSTS OF PRODUCTION INPUTS/HA IN US$ Crop NPK see | Chemicas | Energy J Total Cereals 50 24 20 16 110 Sugarbeet 150 135 140 25 450 Onion 102 600 80 20 802 Maize 84 80 80 20 264 Sunflowers 54 80 80 20 234 Potatoes 150 1,500 600 25 2,275 Assuming onion and potatoes being demonstrated much less frequently than the other crops, the average production costs/10 ha demonstration is estimated at US$3,200. - 88 - Annex J TABLE 7: FARMERS' PARTICIPATORY TRAINING AND INFORMATION SERVICES PROGRAM FARMERS' INFORMATION SERVICES DESK Item Qty Total Cost (US$) Equipment Professional Video camera 1 2,500 Super video cassette recorder 2 2,600 Video monitor 2 1,000 Audio/Video control panel I 1,000 Video control panel I 1,000 Music Control Center 1 400 Computer (Pentium) 1 2,000 Laser jet printer (color) 1 2,000 Scanner 1 1,500 Photocopier (highspeed) 1 10,000 Video cassettes (super) 100 4,000 Dictaphone 2 500 Tape recorder 1 500 Audio cassettes 100 500 Microphone 2 60 Video camera tripod 1 100 Sub-total 29,660 Videos/TV Training video production 40 114,000 Copying training videos 400 16,000 Sub-total 130,000 Technical Brochures 8,000 200,000 Newspaper page space (pp) 300 110,000 Total l l 469,660 - 89 - Annex J TABLE 8: FARMERS' PARTICIPATORY TRAINING AND INFORMATION SERVICES PROGRAM FARM MANAGEMENT AND AGRICULTURAL TRAINING CONSULTANTS (ESTIMATED STAFMNG REQUIREMENTS) Foreign Expertise Local Expertise mm mm Agricultural Training Specialist Training Specialist Farm Mgmt. & Mechanization Specialist Farm Mechanization Spec. Media/Communication Specialist Communication/Media Financial Mgmt./Accounting Specialist Financial Mgmt. Spec. Agri-business/Marketing Specialist Agricultural Economist Other Production Specialists Irrigation Agronomist Hydrotechnician Livestock Specialist Total 50 Total 250 -90 - Annex K REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT ENVIRONMENTAL SUB-COMPONENT A. Institutional Development and Training Institutional Development and Strengthening I . Environmental Assessment (EA) is a process by which alternatives, environmental impacts and costs associated with development programs or investment projects are identified, analyzed ahd evaluated. On the basis of this analysis, monitoring and mitigation measures are usually proposed for incorporation into the design of such programs and projects. EA is best carried out early in the planning and design phases of development programs and projects, allowing time to make design changes and to explore environmentally cost-effective alternatives. 2. While project-specific EA is used to examine the environmental impacts of specific investment projects, sectoral EA is used in designing sector investment projects and programs, particularly for examining investment alternatives, policy changes, and institutional aspects of a given sector. Sectoral EA may cover some of the requirements of project-specific EA; however, projects and sub-projects also need project specific EA to address any important issues not covered by the sector EA. 3. Kazakstan has no previous experience in conducting either project-specific or sectoral EA for agricultural development, including irrigation and drainage. The country still uses the FSU environmental, design and construction standards. 4. The Kazakstan law "On Environmental Protection" provides the broad legal basis for State Ecological Expertise( SEE) (review). The legal framework and practical adaptation of Environmental Impact Assessment (EIA), which should serve together with the project design as the basis for the SEE is still not mandatory and inadequate ; in fact, it does not exist for the agricultural sector. There is a lack of environmental institutional capacity in the MOA on the federal, oblast (provincial) and local levels as well as lack of implementation coordination and enforcement of EIA and SEE recommendations. In the lack of clear EIA/SEE legislation, procedures and guidelines, the MOEB fills in the gaps by issuing directives, the applicability and validity of which are not always clear. To eliminate the shortcomings of the existing situation, clear rules as well as institutional capacity in the sector for environmental management, including EIA, are urgently needed. 5. The project objectives are to: (i) support introduction of applicable legal practice of EA (EIA/SEE) adopted in foreign countries by developing EA procedures, guidelines and manuals relevant for the agricultural sector, and irrigation and drainage in particular; (ii) assist the MOA to build-up its internal environmental institutional capacity on the federal level; (iii) establish and strengthen procedural arrangements for implementation of EA (EIA/SEE); and (iv) work out procedures for cross-sectoral coordination of implementation and enforcement of EA (EIA/SEE) requirements. - 91 - Annex K Training 6. This sub-component is intended to develop and expand the professional skills and capacities of the staff both in public and private organizations involved in implementing the project. It will create a critical mass of well-educated environmental professionals at various levels and institutions, who would share a common understanding and jointly contribute to the environmentally sustainable modernization of the irrigation and drainage sub-sector. 7. Participants in the training program will include: (i) managers, irrigation/drainage and environmental staff, and farmers. The training' will comprise: (a) one annual course of one week duration for national/provincial managers, irrigation/drainage and environmental technical staff. The purpose of these courses is to upgrade existing knowledge and to introduce new concepts about environmentally sustainable agriculture, including irrigation and drainage; (b) short courses, seminars, and study tours to be offered by national institutions; (c) a series of one-day courses on various aspects of irrigation and drainage such as environmental management and economics, monitoring, EIAs, water management, maintenance, problem solving, etc.; (d) field days for farmers. These would promote modern on-farm irrigation and drainage technologies and increase farmers awareness of environmentally sustainable good water and integrated pest management practices. The field days will be organized by provincial environmental coordinating units. Maximum use will be made of the pilot and research projects, EIA and other relevant manuals. 8. The overall design and coordination of the training and professional development program will be under the responsibility of the PIU, which with the help of the MOA and the MOEB which could contract for the services of established training institutions and universities in Kazakstan. A team of international and national experts will develop the content of curriculums and training materials for the different courses. Environmental Assessment (EA) 9. EA, as it is known in international practice, is not generally carried out in a unified way in the Republic of Kazakstan. The legal framework, regulating its application as well as its procedures, are ambiguous. Consequently, the following could hinder the cooperation between the Bank and the Republic of Kazakstan with respect to the Bank's rather extensive medium-term lending program: (i) the lack of knowledge of internationally practiced EA procedures in general, and the Bank's EA requirements in particular; (ii) incompatibilities between the EA procedures used by the Bank and Kazakstan regarding classification of projects; and (iii) differences in the timing of EA in the respective project planning cycles. 10. For this reason, it was agreed by the Bank and the Ministry of Ecology and Bioresources (MOEB), that an Environmental Assessment Harmonization Seminar (EA Seminar) (3 days) will be organized in Almaty with participation from the Bank, MOEB, sector ministries, Government, Parliament MOA, and non-government organizations (NGOs). Monitoring indicators for the training program will be developed and listed in the PIP. Details of the training program will be prepared during the bridging operation and agreed upon during appraisal. - 92 - Annex K 11. The objectives of the EA Seminar are to (i) improve the understanding of the environ- mental, economic and social issues involved in EA; (ii) provide an overview of the Bank's generic and technical principles and procedures concerning EA; (iii) review the present legislation, regulations and procedures of the Republic of Kazakstan to determine areas of future cooperation and assistance; (iv) discuss ways to avoid delays in project processing in various lending sectors; and (v) carry out cross- sectorial discussions of EA issues. B. Development of Water/Soil Quality Monitoring and Agro-meteorological Programs 12. Activities to be implemented under these programs will be of importance for project implementation and supervision and will support environmental quality monitoring, data collection and analysis, feasibility and EIA work, project design, performance monitoring, etc. 13. Under the current situation in Kazakstan, physical and professional capacity of agricultural and environmental agencies is deteriorating fast. Relevant agencies are suffering from under-funding and under-staffing. Therefore, considerable strengthening effort is urgently required. This will be achieved through staff training, as described above, and operational support such as for laboratory and electronic equipment, vehicles and chemicals for analysis. 14. It is also of great importance to evaluate current environmental monitoring programs (surface and ground water, soil, etc.), management systems, standards and methods used for enviromnental analysis and their relevance for the project, and provide advice for necessary adjustments. 15. Implementation of this program will substantially increase the responsibilities and the work-load of the offices of the agricultural and environmental agencies involved. Although the Bank would not finance all related costs, a review of the work program would be undertaken during the bridging period. Any new tasks may require additional qualified staff and funds, including salaries, travel, operation and maintenance, and office supplies. Government's commitment will be sought that the necessary budget allocations will be made available. 16. Activities under this sub-component will also require: (i) strengthening and coordination of cost-effective regional water/soil quality monitoring systems and establishment of new monitoring stations or field sampling where necessary; (ii) Provisions of four different types of equipment: (a) equipment for agro-meteorological, and soil/water chemical analyses; (b) electronic equipment, such as computers, plotters, printers, copiers, fax machines, etc.--this equipment is required for data processing and management, calculation, mapping and report writing; (c) vehicles, i.e. pick-ups, or jeeps for use in the field; and (d) spare parts and chemicals for laboratory analysis; and (iii) training of personnel in calibration of equipment, sampling techniques, and standardized methods for data collection, analysis on personal computers, and interpretation. C. ElAs Preparation and SEE Review 17. This sub-component's objectives are to: (i) further improve EA capacity in the country through the joint work of international and local EA experts; and (ii) conduct ElAs and SEE for the remaining sub-projects to be implemented under IDIP, based on the approaches applied in the SEA and two EIAs that have already been prepared, as well as the SEE recommendations thereon. - 93 - Annex K 18. The World Bank Policy on Environmental Assessment [Operational Directive 4.01: Environmental Assessment (EA)] requires EAs of proposed investments to improve decision making and to help ensure that project options under consideration for Bank financing are environmentally sound and sustainable. The EA evaluates a project's environmental impacts in its area of influence and identifies ways of improving project design and implementation by preventing, minimizing, or compensating for adverse environmental impacts and enhancing positive impacts. 19. This project has been classified into EA Category "B" which requires an environmental analysis, as its potential adverse environmental impacts are not irreversible and would not significantly affect human populations or environmentally important areas; its activities are limited to rehabilitation of existing irrigation and drainage systems and improvement of their operation, and mitigatory measures can be easily designed. 20. The Government's requirements for EA cover two stages of incorporation of environmental concerns into the decision making that are expressed in different terms: Environmental Impact Assessment (EIA)[or, in Russian, Otzenka Vozdeistviya na Okrujajushuiu Sredu, OVOS, which is the responsibility of a project proponent], and State Ecological Expertise (SEE)[or, in Russian, Gosudarstvennaya Ecologicheskaya Ekspertiza, which is mandatory for all investment projects, for foreign investments in particular, and which constitutes a process of state review of the project's design together with the EIA]. The SEE is required under the law "On Environmental Protection", while the EIA process is instituted through a number of instructions and guidelines issued by the MOEB. The process should also be supported by requirements stipulated in sectoral EIA guidelines. 21. Unfortunately, the Kazakstan history of implementing and enforcing strict SEE requirements is rather limited, while there has been no experience of conducting EIA for agricultural development projects, including irrigation and drainage. 22. In order to overcome this situation and to build initial EA capacity in agricultural and environmental sectors in the country, it was suggested and agreed, by MOEB and the Bank, that a team of international and local EA experts would conduct, as part of project preparation, a Sectoral Environ- mental Analysis (SEA) and two pilot project specific ElAs. Both the SEA and the two project specific EIAs have been informally reviewed by MOEB and are being further improved under the PPF. This work should form a basis for further project specific ElAs and SEEs to be accomplished through project implementation. D. Support for Special Envirornental Studies 23. The project objectives are to: (i) support implementation of appropriate water/soil quality monitoring and agro-meteorological programs focused on the irrigation and drainage sub-sector but limited to the scope of the project as recommended, by the SEA and further relevant analysis under the PPF; (ii) provide continuous monitoring of the project's performance environmental indicators; and (iii) provide a basis for planning a coordinated environmental system for the sector, that can be implemented when the economy improves. 24. To ensure environmentally sustainable agricultural development and effectively protect, manage and use water, land, forests, etc., the condition of the resources (soil, water, etc.) must be known. This condition is in constant change, so that monitoring is necessary. - 94 - Annex K 25. Kazakstan has inherited a vast environmental monitoring system, including programs, analytical methods and standards from the FSU. One of the distinctive features of this system is that a number of agencies are involved, through stationary data collection and field sampling. Coordination of these programs, their methods and standards is rather poor. Another feature is that environmental monitoring has not been specifically designed to monitor performance of agricultural activities, including irrigation and drainage projects. 26. Currently, Kazakstan is not able to provide adequate budgetary resources to sustain environmental monitoring. Agencies involved in these activities are forced to significantly cut staff, pro- grams, and the number of monitoring stations and sampling for analysis. This will affect the capabilities in the country for sustainable agricultural development and the monitoring of environmental impacts and changes which could occur due to implementation of IDIP. 27. Implementation of the project will substantially increase the responsibilities and the work- load of the concerned oblast offices of agricultural and environmental agencies while new monitoring stations may also have to be opened. These new tasks may require additional qualified staff and funds, including salaries, travel, costs for operation and maintenance, and office supplies. Government's commnitment should be sought to budget any funding gaps to cover these operational expenses. -95 - Annex L Kazakstan Imgaton and inage Improvement Project Implementadon Plan _ ~~~~~~I' IN 'lw I ' Is '" I W iR ~~~~13 137 1313 | | j 7 7 i- 1 .---T ID T*A_ __ _ _ I _,_ s~~_ _ _ _ _ . _ _ . I I _ _ _ _ _ __ _ I i :_ 1- 81 Lwpirt, _ .1'..11 w - . ________ I___ .__ ,_____ i X - iiI I 1a 1 OF LOCAL iii X -D 17 EMY3ImLc?3a 111 Ad2 _ D Lm_ I ' in cl _FM 111 uvnRA T. ., _ _ ' M ClSIICiTI . i eEiFi;G REPUBtLC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVENIENT PROJECT Table 1. Pilot far Agricultural Training & Infornmglon Support Detailed Cn ls (USS) IC~~A!~L I _____ [DM12 ftiaiu crslj /3ee Coe1f- N ~otle (MliUeiL 1TBt4L Inchldin C.n6og n.- WiabCl.) Uhd 9"71 97/981 9&W 9,WT 9900 01] 01/02 97 I'" 9100 0J"I 01102 [iha In. w..tm.n Camti A. Faran ParUdp.tary Tn.-aIalg and lhlacmalko S.n4ea 1- Tralniag Eqwpmnem amnoun 0 04 - 0 04 0 04 - - 0 04 TrmaCourg u anuwu 0 04 0 05 0 05 _ 014 0 05 0 06 0 07 017 Sub1lr Trlaiag 0 08 0 05 0 05 018 009 0 06 0 07 0 22 2 Dendrstaiaa Producton Inpub mo0 03 0 07 0 07 0 17 003 0 08 0 09 0 21 I. nnimaltsa Servime Equpn uno- lt 0 03 - - 003 0 03 - - 0 03 VideodTV producton mount 003 0 05 0 05 013 0 03 0 06 0 06 016 Pnrnled Matenial nounl 0 05 0 07 0 07 O 19 0 05 0 08 0 09 0 23 Fuane, Weekly amount 0 03 0 04 0 04 010 0 03 0 04 0 05 0 12 Subclal Iam.rm aa Service 0 14 016 016 0 45 016 0 19 0 20 0 54 05 4. Teekiceal A-Wxte-0n For.gn TA peca won 25 25 - 50 20,000 0 50 0 50 I 00 0 57 0 58 - I 15 Local TA pMr mon 70 90 90 250 500 0 04 0 05 005 _ 013 004 005 0 06 015 Subilal T-bak.l Auistaxce 0 54 0 55 0 05 i 13 00 0 006 -w - - 130 ____________________________________________ _ _ - - -~ - 078 083 0.33 = = 195 088 097 042 2 = 227 - 97 - Annex M - - s~s~.i~'!T -A! $n . . . . . . . . . . N . . . T . . . . . . . ! . . r fl e r _ w1 _ re ~~~~~~~~. . . . . . . . . . . , I er r = ~ oo o 0 ~ - 000 . - 0 0 0 0.0.. . . . . . . . e _ o _ = o O o. . . . . f i.. . . . . . . . .. . . . . . . . . .__o _ -__o8__8o_ o _ X °Sor rr ; _ _Z__-_ a... is -4 & S Z ...~~~~~~~. . . . . . . o o o ° ' ' ' . .. . . . . . . . . . . 5 il8858a - - ooo N ~ ~~~ . 00 ' o8000"°°1 8c D t1 S w . . . _ z 000 0_.. ... oSooi II ;| i _i; ___ oo°o _ 8 U o U i e ! _ . f - ; a ~~~~. ... i~~~~ Si ,1i ,, Cd~~~~~~I _ U REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJICT Table 3. Ei0Nghrig & mgmpmi Comauloa a-.I I b1. & M _ C L~~~. b..0 , . mw p/ M" fw 0nl OL rgv I.C9 I Pv 1 n *&V OI rod Lc mg X ,, ", Owe M I O "z I r d A.." T_ L.". 12 12 12 - . . 30 23U00 0.28 0.U 02 . . 0.83 9.29 00 3 0 32 . . . .01 C_=l _ I Z a 11 12 12 It.s 58.5 2U000 020 0.23 02 0U Zs 0.14 . .35 829 030 0.32 0.33 0.31 . .23 D...p . _ 12 22 12 . . . 16 213,0 0.28 O.2U . . . 0.3 0.29 0.30 0.e3 . . . .01 A.o_ _o 2 2 - . . 3 2U.00o 0 0.02 - . 0.07 0.0 003 . . . 0.07 _d p. 2 I I - 3 2,0O0 0 02 0.82 9.02 0.07 0.02 0.02 0.03 0 _- -- - - . - . . . . .- A- PS *". ".kg p 3 2 2 7 7 23,O0 0.07 0.03 0 03 .| 3 8.07 9.03 0.02 9'.889m.20 22 22- - 2 3.0 02 12 .3 03 .0 . -83 a~~~~~~~~~~~2 2 . 0 l.3 . . 23 2 3 800 0.0 0.0 0.02 . . 8.0s 0.02 o003 0 .0 . - 6.8 ftAl_ "aZ " I is 2 23._00 O8.8 0.02 -O 0.03 0.02 0.04 O 0.03 h.. . 89.S..d.a . _ fA-W 3 2 . . - 2.3 231000 &02 0.02 0.01 D O 0.02 0 03 . 1 . 0 0.01 EA2.l _I 3 0D. 8.4 800 00 0.82 02 | 0.05 0.04 0.01 O0.0 0.02 00 00. C4n4acu4ul Sp-end 12- 1 . . 3. 2.2 05 02 03 02 423 2.2 2.4 2.0 0.2 0 . 02 All- LKd_ 2 22 223 300 0.00 000 0.00 0.0 2 0.' 0.00 0.00 D. 0.02 D e27 S.kmiy_ W.?_ p.n 2. 2 22 22 1 I 20 7 00 10.0 0.01 0.0 0129 01 O 0.00 0.025 01.0 01.0 0 09 01 01 O 01 0.02 2_a~~~~~~~~~~~~~3 33 52 4 22 o . 2 I Z 20 500s 0.03 0.0 0.0 0. |D02 0.0 0 02 0.0 0.0 0.0 00 0.0 0.2 62 Afr. 124 2 2 12 010 300 0. . 000 0.00 00 005 0.02 0.0 00 0 0.04 CA.0 p. 22 2 2 I . 36 200 0.02 0.03 0.02 . 0.0 003 0.0 00 . .0.02 Drio..oI00 8 00 22 2 2 2 220 300 0.02 0.02 0 02 0.00 0.0. a 0 D D0 0.0! 00 02 0 0.03 0.0' 000 0.02 0.0' WIIA8d 43U.. Iqg..2 0.07 000 0.00 0.02 0 1 00 a 0.23 007 O. 0.00 001 0.02 0 002 0.01 2. i"IJp yno .g. 600 s 30 DO .0 D | . . | DI ov O 3.... C N *32 22s 12 12 22 2 22 2 72 5U00 3.02 0.02 0.02 0 00 . 0.04 00 0. 0 0 0.03 12 D,i - 2 22 22 L 3 30 0.02 0.2 02 00 0072 0.02 0 .2 I 0 0.09 C 0 . ' ~ _. a_ F_ill * D- i. Co AIOIN 0.0.* . . . I .0 O. D- 7. .. 19 L C _ I Ke6 01e- Ne s 3 3 . . . 0 500 0X .00 0.0 0.0 . D 3.0 00 0.0 0.0 . . . 0.02 Cqn N~i0. 3p... p. . . . . . 0. ,D .0 .. . . . |. ; . . . . 00 D0Ar Ne8.. (24~ . . . . .- Le O.O . . .O . | .o OD . . DO. . §e 2*009.oii 22 22 22 2 2436 500 002 0.002 0.02 . . 002 0.02 0.02 0.02 . . . 0.01 F_ 3pn No 6 . . 28 30 0.001, 000 0 .00 . | 0.02 0.0 OO O.00 0.00 . . 0.02 Cp...PtV33w. No.. 0 0 0 . . . I0 300O 0.00 0.0 0.0| . |- 0.0 .0 00 0.0 * . 0.02 F..*.2CJ . . 4 80 22 22 2. 00 4. 2 5,00C .2O0 00 004 0.0 0.0 0.0 .0 004 05.02 0.3 003 02 C__ 0..C___ LKd I. O2 0 2 O 2 4 2 O 0 0 0 0 000 O I 0.0 0 0 0 0 0 0 2~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0 ]Gla e N.Maw N. d0.0 0.0 0.26 0.20 0. 004 a . | * 07 0 020 02 0. 0 2* .02 000 0.09 % Di No F.iiM A .'s .8. . | I,OC 0.0 0.8 000 . | 2.00 0.0 00 0.0 . - 0.004 L L- L.d U. i.. P-= 3 r _ - eli 2 0.07 . . O 01 0 01 eu 00 0 2 0.01 0.01 -0 0 01 0.0 _..i. D..iv K.6- 04 _ .. 2 a2_ 2. 0.02 00 0.02 04 2 0.0 .1 0. 032 248... .08 0.0 - - 0.02 0.02 - - - - = 0.0 1. 24.~~~~~~~~~~~~p 2 3 . 2 2 200 000 - -00 0 . ..0 0.00 0.00 0. - 0. 0 0- 0.00 F93 , 4 N.2 o. 2 .00 .0Sp..".00 002 . . - .0 D08.6.y E.i. ( 200 0.2 . . P00-.0= -- 0 Eqp6.. p- ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 0.2 - . 00 .0 - . 00 am Sp-am L..dO2U 2. 0.20 0.02, 02 02 0.2 - 20 02 0.0.0 .01 0.00.2 0.22 CU o..i N. 2 - . I a 2,000 0.2. .-.002 G :. 002 - - - .02 0,80... N.~~~~~~~~~~P- 2 . .0 0.0 .- - 000 .0 . - 00 C-M.d- el-* (ViN. 2P-= -0 ,2 o 2.00 0.0 - . 0 I . 0 0.0 0- 0.0 0.3 0.3 00 84 N. ~ ~ ~ ~ ~~~ ~ ~ ~~~~~~~20 20. 4. DO 2Do 0.00 2 - 1- a .6 2. 0.00 8.0 0 . 01 . la a 0.07 (NO 0.82 - . - 0.022' 1 0.0a2 - . a 8.02I ~~00d 000 0.02 __________- . . 0.02. 2.05I-G.I- 0.0 SAWA L-wg. 0.20 0.02 0.02 0.02 0.021 00 0.22 0.28 0.02 0.021 0.624 0.02 a 09__ 6." s.m" L-w r- - -- - - - - - - .3 2.2 02.0 0.47 0.30 0.07 7 9 01 .27 2.4 .3 20 0.26 0.40 0.22 0.0 REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT Table 4. Components Project Cost Summary |__% _ %Total (Tenge Million) (USS Million) Foreign Bake Local 0 Foreign I Total Local I Foreign I Total Exchange Costs A. Irrigation and Drainage Rehabilitation 2,693.99 2,269.67 4,963.67 42.49 35.80 78.29 46 90 B. Agricultural Development 1. Farmers' Participatory Training and Information 51.29 71.31 122.60 0.81 1.12 1.93 58 2 Subtotal Agricultural Development 51.29 71.31 122.60 0.81 1.12 1.93 58 2 C. Institution Building Implementation Support (P1U) 50.12 86.09 136.21 0.79 1.36 2.15 63 2 Environmental Support and Monitoring 91.10 72.62 163.72 1.44 1.15 2.58 44 3 Pilot for Irrigation Management Transfer 4.95 9.89 14.84 0.08 0.16 0.23 67 - Subtotal Institution Building 146.17 168.60 314.77 2.31 2.66 4.96 54 6 D. Refinancing PPF 23.78 71.33 95.10 0.38 1.13 1.50 75 2 TOTAL BASELINE COSTS 2,915.23 2,580.91 5,496.14 45.98 40.71 86.69 47 100 Physical Contingencies 278.76 227.26 506.02 4.40 3.58 7.98 45 9 Price Contingencies 1,170.18 298.97 1,469.14 18.46 4.72 23.17 20 27 TOTAL PROJECT COSTS 4,364.16 3,107.14 7,471.31 68.84 49.01 117.84 42 136 xb REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT Table 5. Expenditure Accounts by Components - Base Costs (USS Million) Agricultural Developmen,t Farmers' Institution Building Participatory PAiotfor Irrigation and Training and Environmental Irrigation Physical Drainage Information Impementation Support and Managemnent Refnancing Contingences Rehabilitation Service Support (PllJ _ _Mn_er__g _r_aSf_ PPF Total %____ _ nf 1. Investment Costs A. Civil Works 70.02 - 0.22 . 70.24 10.0 7.02 B. Goods I. Equipment & Machinery 1.10 0.07 . 1 I .17 10.0 0.12 2. Materials 0.60 - 0.24 0.84 10.0 0.08 0 3. Field & OfFice Equiprnent 0.03 - 0.10 0.88 1.01 9.8 0.10 SubtotalGoods 1.13 0.66 0.10 1.12 3.02 9.9 0.3 C. Vehicles 0.07 - 0.09 - 0.16 6.7 0.01 D. Consultancies Engineering & Constr. Supervision 6.13 - 1.70 I 3.50 9.34 3.5 0.32 Technical Assistance 0.93 1.13 - 1.06 0.23 - 3.36 7.9 0.27 Training - 0.14 0.25 0.19 0.58 10.0 0.01 Subtotl Consultancies 7.07 1.27 1.95 1.25 0.23 I.50 13.27 4.9 0.65 oal Investsnent Costs 78.29 1.93 2.15 2.58 0.23 1.50 86.69 9.2 7.98 L Recurrent Costs 78.29 1.93 2.15 2.58 0.23 1.50 86.69 9.2 7.98 Physical Contingencies 7.29 0.19 0.21 0.26 0.02 - 7.98 Price Contingencies 22.56 0.15 0.39 0.06 0.02 23.17 8.9 2.06 108.14 2.27 2.75 2.90 0.28 1.50 117.84 8.5 10.04 Taxes 17.04 0.13 0.23 0.39 0.05 17.83 9.0 1.6 ForeigaExchange 43.451 1.301 1.64 1.313 0.18 1.13 49.01 8.1 3.99 -101 - Annex M REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT Table 6. Project Components by Year - Base Costs (USS Million) 96/97 97/98 Base Cost 012 Toa 96197 97198_98199_ 99/00 100/01 01102 Total A. Irrigation and Drainage Rehabilitation 2.43 7.73 18.35 20.85 19.42 9.50 78.29 B. Agricultural Development 1. Farmers' Participatory Training and Information Service 0.78 0.83 0.33 - - - 1.93 Subtotal Agricultural Development 0.78 0.83 0.33 - - - 93 C. Institution Building Implementation Support (PrU) 0.42 0.39 0.43 0.36 0.32 0.23 2.15 Environmental Support and Monitoring 2.37 0.21 - - - - 2.58 Pilot for Irrigation Management Transfer - 0.17 0.06 - - 0.231 Subtotal Institution Building 2.79 0.77 0.49 0.36 0.32 0.23 4.96 D. Refinancing PPF 0.25 0.25 0.25 0.25 0.25 0.25 1.50 6.25 9.58 19.42 21.46 19.99 9.98 86.69 Physical Contingencies 0.43 0.77 1.78 2.09 1.95 0.97 7.98 Price Contingencies 0.15 0.67 3.45 6.13 7.581 5.20 23 17 6.83 11.02 24.65 29.68 29.52 16 15 117.84 Taxes 0.63 1.31 3.77 4.76 4.76 2.61 17.83 Foreign Exchange 4.05 5.76 9.49 11.42 12.24 6.041 49.01 REPUBLIC OF KAZAKSrAN IRRIGATION AND DRANAGE IMPROVEMENT PRoJEcr PROCUREMENT PLAN Contract Type Estimated Procurement No. of Responsibkl Bid | implemeut. Component/ltem J Cost" Method Contracts Agency Documents Period (US$ M) Available Irrigation and Drainage2" 1. Chengeldy Farm Works 7.77 ICB I PIU 08/96 09/97-10/00 2. Kzyl-Agash Works 6.53 ICB I PIU 10/96 10/97-11/99 3. 70 Wells (Maktaral District) Works 7.91 ICB I PIU 12/96 11/97-12/00 4. Mimy Farm Works 7.52 ICB I PIU 02/97 12/97-01/01 5. Akkumsky Farm Works 1.17 ICB I PIU 04/97 01/98-02/00 6. Pritobolsky Farm Works 4.25 ICB I PIU 05/97 02/98-03/00 7. Dzambul Farm Works 3.88 ICB I PIU 11/97 09/98-10/01 8. Prirechensky Farm Works 2.73 ICB I PIU 12/97 10/98- 11/01 9. 60 Yrs. of October Farm Works 7.41 ICB I PIU 01/98 11/98-12/01 10. Saryozenski Works 1.93 ICB I PIU 02/98 12/98-01/01 11. Krasnaya Polyana Works 9.99 ICB I PIU 03/98 01/99-02/02 12. Third Year Projects Works 34.87 ICB 5 PIU 11/98 09/99-01/03 13. Third Year Projects Works 3.03 NCB 7 PIU 11/98 09/99-01/03 14. Drainage Machines Goods 1.29 ICB I P[U 09/96 10/96-04/97 15. Engineering & Manag. Cons (Firm)3' Consultant 7.69 S-List I PIU 05/96 10/96-10/99 16. Engineering & Manag. Cons (Firm)4' Consultant 1.22 S-List I PIU 05/99 10/99-10/03 Agricultural Component 1. Agricultural Inputs Materials 0.20 NS 5 PIU 02/97 03/97-03/99 2. Printed Material Materials/Services 0.34 NS 10 PIU 03/97 04/97-04/99 3. Video/TV Production Materials/Services 0.16 NS 5 PIU 03/97 04/97-04/99 4. Farm Mgmt & Training Consult (Firm) Consultant 1.47 S-List I PIU 05/96 12/96-12/99 5. Training Equipment Goods 0.04 NS 2 PIU 01/97 N/A 6. Equipment for farmers' Info Services Goods 0.03 NS 2 PIU 01/97 N/A Contract Type Estimated Procurement No. of Responsible Bid Implement. Component/Item Cost" Method Contracts Agency Documents Period (USS M) Available Institution Buildine 1. Environ. Consultants (Firm) Consultant 1.22 S-List I PIU 06/96 01/97-01/99 2. PIU Specialists (Individual) Consultant 0.65 CS 12 PIU N/A 10/96-01/03 3. Vehicles Goods 0.11 IS I PIU 12/96 N/A 4. Office Equipment Good 0.44 IS 3 PIU 12/96 N/A 5. Environ. Moniloring Equipment Goods 0.68 IS 4 PIU 02/97 N/A 6. Other Equipment (Clean Water Pilot) Goods 0.27 IS 2 PIU 02/98 N/A 7. PIU Resident Constr. Eng. (Individual) Consultant 0.40 CS 20 PIU N/A 09/97-06/03 " Including taxes and contingencies 2 Costs for shelter belts (US$0.22 million) included in the works 3' First contract for three years only; engineering contract includes US$0.82 million in institution building elements: (i) environmental assessments (US$0.20 rnillion); consultants for Irrigation Management Transfer Pilot (US$0.28 million); and study tours (US$0.34 million) o 4/ Extension of first contract following satisfactory performance :z - 104 - Annex 0 REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT DISBURSEMENT PROFILE Disbursement Profile IBRD Fiscal Years Cumulative Cumulative and Quarters B ure By Quarter (US$ (US$ (%) (%) Million) Million) 1997 2 -- -- 0 0 3 1.0 1.0 1.3 0 4 0.2 1.2 1.5 0 1998 1 1.2 2.4 3.0 3 2 2.4 4.8 6.0 -- 3 2.6 7.4 9.2 6 4 2.5 9.9 12.4 -- 1999 1 2.9 12.8 16.0 14 2 2.9 15.7 19.6 -- 3 2.9 18.6 23.2 26 4 2.8 21.4 26.8 -- 2000 1 4.8 26.2 32.8 34 2 4.8 31.0 38.8 -- 3 4.8 35.8 44.8 42 4 4.9 40.7 50.9 -- 2001 1 5.1 45.8 57.2 54 2 5.0 50.8 63.5 -- 3 5.0 55.8 69.8 66 4 5.1 60.9 76.1 - 2002 1 3.8 64.7 80.9 78 2 3.8 68.5 85.6 -- 3 3.7 72.2 90.3 86 4 3.8 76.0 95.0 -- 2003 1 1.0 77.0 96.3 94 2 1.0 78.0 97.5 -- 3 1.0 79.0 98.8 98 4 0.5 79.5 99.4 -- 2004 1 0.5 80.0 100 100 KAZAKSTAN: IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT ESTIMATED DISBURSEMENT PROFILE 100 _ _ _ _ 95I 90 35 70 63 30 2011 D '5 1 0 MAR SEP>T FYISEP MAR SEPT MAR SE200 MAR SEPT MAR SEPT10 MAR SEY20 MA FY1997~~~~~~ X Y99 FYi999 S Y00 FYar I b FY20 F _Y-E20_0Q3"e 30~~~~~~~~~~~~~~~~~~~~ - 106 - Annex P REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT PARTICIPATION GUIDELINES 1. This annex discusses the background and rationale for the participatory approach used in the project, as well as the five-step consultation and decision-making mechanism that will ensure that beneficiaries have the final say in technical and financial decisions that affect them. Background 2. Widespread experience throughout the world has demonstrated that actively engaging stakeholders, particularly beneficiaries, in the design and implementation of development projects has short-term and long-term benefits. In the short term, participation promotes ownership and speeds implementation; over the long-term it promotes sustainability. This consideration is particularly relevant when there are multiple stakeholders, when participating institutions have different levels involved, and when there are new stakeholders or stakeholder roles are changing. In such cases, it is important to include different stakeholders in appropriate ways at various states of project preparation and implementation. In this context, stakeholders include the gamut of institutions and individual that have an interest in the irrigation and drainage investments, from officials in different institutions to irrigation and agricultural technicians, legal experts, contractors, owners, direct and indirect beneficiaries, non- governmental organizations (NGOs) and funding agencies. 3. Currently, World Bank participation literature identifies four principal levels of participation that vary from simple consultation with stakeholders to empowering them to make basic decisions: i Information Sharing. Shareholders are informed about the process of project preparation and the nature of the project that is emerging. e Consultation. Shareholders are engaged in a two-way dialog in which their opinions and priorities are solicited and used to define project parameters. * Joint Decision-Making. Relevant stakeholders jointly make major decisions relating to the project. * Empowerment. Stakeholders (especially beneficiaries) are given primary responsibility for major project decisions. 4. These participation levels are cumulative: consultation involves sharing information, and joint decision-making includes both information sharing and consultation, for example. All levels will be utilized in the project. 5. This project has been participatory since its inception. It started as a central government initiative, based on information and requests generated at the oblast and district levels from agencies and farms. Since the time the local requests were aggregated into a long-term irrigation and drainage - 107 - Annex P investment plan, some of the stakeholders have changed structure, status and roles, and others have emerged. The project itself will precipitate additional changes, the most profound of which is the transformation of farmers from subjects to clients. Consequently, the project must take into account the changes and lay the groundwork for future evolution. The Project 6. Ultimately, the project will promote the empowerment of water users on three institutional levels: first, they will decide on the nature of onfarm investments to be made; second, they will be involved in establishing and managing water user associations (WUAs); and third, in at least one area they will become shareholders in an inter-farm canal management enterprise. 7. The Irrigation and Drainage Improvement Project will involve a number of different types of stakeholders, most of whom are in the process of re-defining their roles and responsibilities, as well as their rights. On the surface, the project will appear to be "business as usual": central, oblast and district officials of the Ministry of Agriculture and the Committee for Water Resources will oversee a program of investments to improve irrigation and drainage infrastructure on and between state and collective farms, based on the work of design institutes. The visible participants, as during the previous administration, will be the officials, design engineers, farm managers and construction enterprises. 8. Below the surface, however, the undertaking will be anything but "business as usual" because each institutional participant will be working within a qualitatively new framework that offers both constraints and opportunities. The decisions and actions of each of the visible participants--officials, engineers, farm managers and contractors--will be constrained by the participation of two new types of stakeholders who have heretofore been rather invisible--the shareholders of former state and collective farms and independent farms who have broken away from the former state farms. Both of the new groups are expected to repay the cost of onfarm investments, thus they must agree to make the investments. To gain the commitment of these new players, therefore, the visible participants will need to inform stakeholders about the program and its intended benefits and mutual obligations; provide options and explain the financial and O&M implications of each; prepare detailed designs according to their wishes; ensure that the work is complete as promised at the specified cost; and prepare them to assume responsibility for subsequent operations and maintenance. 9. This decision-making process may take more time than a process that only involves the visible stakeholders, and it may result in the adoption of the most conservative, least-expensive technologies, despite recommendations of officials and technical experts. On the other hand, the process may lead to the adoption of new irrigation and drainage approaches to deal with innovative cropping and management patterns that are designed to increase the financial prospects of the farms under new economic circumstances, patterns that are more imaginative, far-sighted and pragmatic than those promoted by the agricultural officials who are used to setting policies and programs. Participation Rationale 10. The most important element of the project's participatory approach is a 5-step consultation and decision-making process that will require project staff to interact with independent farmers and farm shareholders on each farm at five specific stages in the rehabilitation and improvement process. The objective of the 5-step process is to empower beneficiaries to be actively involved in making decisions that affect them and to prepare them to assume obligations inherent in their decisions. The overall - 108 - Annex P program reflects currently acknowledged best practices in the sector, with specific elements added to deal with Kazak circumstances, prompted by findings of the project social assessment. 11. Through interviews with managers of over 30 farms, household surveys on 10 farms and focus group discussions on 5 farms, the social assessment concluded the following: * farmers appear to be poorly informed about the privatization process in general, as well as their specific rights and responsibilities regarding farm management, ownership and their ability to liquidate their own shares; indeed, many on privatized farms do not know they have been privatized and others on farms that still remain under state control believe that they have been privatized. * farm managers are somewhat better informed about the privatization process and the implications of the management form adopted on their particular farms, but they know little about alternatives and they still find themselves subject to formal and informal orders issued by district and oblast officials. * farm management structures appear to be evolving, tending toward restructuring to some degree, at least; most of the sampled farms that were privatized 2 or 3 years ago, have changed management pattern at least once, and most have spun off one or more independent farm units. = farm managers appear to make most farm-level decisions, but they seem no longer to have the final word on all decisions; ultimately, they report to the general assembly of shareholders who can replace them and, with increasing frequency, do so. The latitude of decision-making by managers is somewhat ambiguous, however; managers feel hand-tied and farmers feel powerless because the decision-making process is neither transparent nor consistent. * farmers increasingly question the motives of farm managers, and do not trust them to make financial commitments on their behalf. * neither farmers nor farm managers appear to understand the ownership status of the irrigation infrastructure, and the implications of ownership for concomitant operation and maintenance responsibilities. * independent farmers feel themselves to be marginalized in many ways, but particularly with regard to irrigation water, to which they feel that their access is irregularly and arbitrarily granted. * for the most part, farmers are unaware of their right to withdraw from former state farms and turn their land use entitlements into specific plots; in some cases, the right is not recognized by farm the bylaws of the new management entity. 12. Given the need to increase the quantity and quality of information available to farmers and farm managers, to increase the level of trust on the major farms, to narrow the growing rifts between the management of major farms and the independent farms, to deal with the uncertain tenure of farm managers, and to reflect the vested interests of both independent farmers and farm members, it is - 109 - Annex P essential to entrust the decision to participate in the project to all farmers, rather than farm managers. Moreover, project related decisions need to be taken in an iterative fashion at several stages in the rehabilitation process. The 5-step process was designed to meet these needs. The Five-Step Process 13 . The participatory framework for major project decisions focuses on 5 discrete steps design and implementation that require informed decision-making and/or consent. At each step, a project delegation will go to each farm to meet with the general assembly of farm members and all independent farmers on the former state farm property to explain the decision(s) to be made, present alternatives, if appropriate, explore implications and answer questions. Although the initial plan is to conduct one meeting at each stage, experience will determine if one meeting is adequate or if each decision should have a two-stage (information meeting, followed by decision meeting) meeting sequence. At each step, the meeting must produce a document that identifies participants; records discussion topics and various positions and questions; records the votes on decisions; as relevant, reiterates previous commnitments and participation requirements; and acknowledges the future commitments implied by the current decisions, particularly regarding cost recovery and O&M. The 5 steps are as follows: 14. Step I: Initiation. The first step is a consultation meeting in which project staff describe the project, participation requirements and limitations, the sequence of events, residual responsibilities and cost recovery mechanisms. Farmers and farm management assure compliance with project requirements, particularly the easy exit clause in bylaws or outline steps that will be taken to assure compliance and identify priority areas for intervention and/or choice of technology. Note: this step will apply to the second set of projects, not the first set that were included in the project appraisal list for year I and year 11 projects, as they have already progressed beyond this stage. 15. Step I1: Fixing the Package. At the second step, project design staff will present alternative packages of interventions that respond to the priorities expressed in step 1, describing the nature of each, their estimated cost and operations and maintenance implications, as well as the cost recovery burden that each would impose. At the end of the step, farmers will report specific choices and reiterate their understanding of the estimated cost, cost recovery estimates, and the operations and mainteniance implications of the choice. A Letter of Intent would be signed by farmers' representatives, indicating their agreement, in principle, to a specific project design, related costs and repayment terms. 16. Step III: Final Design. The third step will be a detailed presentation of the final design, along with more detailed cost, cost recovery and O&M implications. At the conclusion, farmers will consent to the design or specify modifications to be made, and reiterate their understanding of the cost and O&M implications. If the farmers agree, a formal Letter of Agreement will be signed. 17. Step IV: Tendering. At the fourth step, farmers will be informed about the tendering process and either agree or disagree to the timing, cost and sequence of events, specifying parameters within which changes can be made without requiring additional consultation and approval by the general assembly. If the tender cost is too high, farmers have the option to terminate the process at this point. 18. Step V: Performance Testing. At the conclusion of construction, before the work is handed over to the farmers and the final payment is made, farmers must participate in a performance test to determine the extent to which construction meets design and performance specifications. Any - 110 - Annex P differences between specifications and actual measurements must be identified and agreement must be reached regarding how to handle them--ignore them, modify O&M parameters or require remedial work. The report of the exercise details the issues and decisions, as well as responsibility and timetable, both for the works and the concomitant cost recovery and O&M responsibilities. At the conclusion of this exercise, the designer will present an O&M manual that is satisfactory to the farmers. 19. This 5-step process will institutionalize new roles and responsibilities for different stakeholders. It establishes farm members and independent farners as irrigation clients, rather than subjects; it relegates farm managers to technical and advisory roles, rather than decision-making roles; it recognizes the rights and responsibilities of independent farmers, and integrates them into the decision- making process; it requires technical people to be patient and articulate, responsible to user clients, rather than officials; it creates broad and deep channels for the flow of information about water management, farm management and technologies for each; and it provides the form for developing new working partnerships between independent farmers, farm members and officials, based on common interests, differences and interdependencies. In effect, the 5-step process will ensure that farmers who choose to benefit from the project have adequate voice and informed choice, based on sound technical information. 20. Successful execution of this 5-step process will require new communications patterns between farmers and officials and technicians which, in turn, calls for officials and technical people will need to acquire new communications skills. They need to learn to facilitate discussions, rather than dominate them, and they need to practice mediation and consensus building, rather than commanding acquiescence. The process will require both patience and discipline to carry through to the end. Technical assistance advisors will coach and train staff in the required skills. WUAs and Irrigation Canal Company 21. On successively higher institutional levels, the project will also promote water user organizations. The WUAs will bring all farmers into an institution that manages water, thereby offering independent farmers a mechanism to protect their interests, as well as to integrate their needs into the broader context of farm-level water management. On the canal command level, the proposed pilot canal company will similarly offer farms and independent farmers an opportunity to manage local water resources according to their common interests, and to ensure that the inter-farm system is operated in response to their needs, rather than to the demands of an external bureaucracy. The arrangements for both levels of institutions will be worked out in more detail during project implementation. Typical Sub-Project Plan D5 | 1996 | 1997 | 1998 1999 2000 2001 2002 ID Task Name Q3|Q4Q1 l2iQ3|Q4|1Q1031041Q1 02 03l04101 0Q20Q30Q4011 |Q2|031041Q1 Q20Q3 Q4|1 0Q2 Q3 1 Typical Sub-Project 2 PROJECT IDENTIFICATION 3 FARMERS PARTICIPATION 4 Discuss Prelim. Studies & Decide Approach 5 Signing Letter of Intent i0/13 6 Discuss Design & Operational Principals, Cost. Timetable 7 Signing of Letter of Agreement 8 Discuss O&M Details 9 1st Adjustment of Cost Recovery Fee *71 10 2nd Adjustment of Cost Recovery Fee 11 Project Commissioning _ 12 PROJECT APPROVAL PROCESS 17 LOCAL BUDGET APPROVAL 18 FY YR1 (Designs) li'/ 19 FY YR 2 (Construction) i 1*111 20 STUDIES & ENGINEERING DESIGNS 21 Pre-Feasibillty Study 24 Feasibility Study 31 Environmental Impact Assessment . 32 Engineering Design 40 O&M Plan 41 SUBPROJECT BIDDING __x 42 ICB: Civil Works 50 CONSTRUCTION PHASE - 112 - Annex R REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT MNISTRY OF AGRICULTURE (MOA) ORGANIZATION 1. Responsibilities. The responsibilities of the Ministry of Agriculture (MOA) are defined as follows: * The development and elaboration of concepts and perspectives for the various aspects of agricultural production. * Implementation of the State program for the development of the agro-industrial complex and the investment policy for agriculture. * Promoting the rational use of farm lands. v Registration and management of the Land Fund. * Proposing and administering environmental legislation in the agricultural sector. 2. Organization. The Ministry of Agriculture was established by a resolution of the Cabinet of Ministers. There are 16 subdivisions and about 40 lower divisions in MOA throughout the Republic. In addition, also under the mantle of MOA, there are regional and district agricultural agencies, funded by local budgets, union associations, and numerous related but independent organizations. A general organization chart of the MOA and related organizations functioning in agricultural water management is presented in the attached Table. 3. It maintains an Environmental Department, which is charged with developing and recommending measures for the protection of land resources. 4. Capability. During the period of transition to a market economy, all institutions dependent for funding on the Treasury of the Republic have undergone severe financial restrictions, which have negatively affected their ability to meet their primary and secondary responsibilities. In the case of the MOA, priorities have dictated the continuance of direct support for agriculture, but research work formerly carried out by its scientific institutions and agro-chemical laboratories has essentially stopped and some facilities have been shut down. The remediation of environmental problems resulting from past agricultural activities has been nonexistent, since this sort of problem is well down on the list of priorities. Even the issuance of information bulletins and catalogues of statistical information has been severely curtailed. 5. The ministry has no section dedicated to the analysis and management of the environmental effects of new projects. - 113 - Annex R ORGANIZATION OF THE MINISTRY OF AGRICULTURE Leadership Deputy Prime Minister for Agriculture and Water Resources Minister of Agriculture First Deputy Ministers (2) Deputy Ministers (5) Construction, Material and Technical Supply, Farming, Fish Management Main Departments 1. Economics, 2. Farming, 3. Cattle Breeding, 4. Fodder with State Pasture Inspection, 4. Finance, Accounts and Calculations, 5. Meat and Milk Industry, 6. Educational Establishments and Science, 7. Capital Construction, 8. Personnel, 9. Veterinary Department with State Veterinary Inspection, 10. Mechanization and Electrification, 11. Central Auditing, 12. Logistical Funds, 13. Law with Arbitration, 14. Land Relations and Nature Protection. State Joint Stock 1. "Zhivprom", 2. "Ptitseprom", 3. "Kazplem", 4. Foreign Economic Companies "Kazaprovneshtorg", 5. "Kazplodorodie", 6. "Kazagropromstroi". Committees 1. Committee of Water Management State Inspections 1. Supervision of Equipment Condition, 2. Labor Protection and Traffic Security Department, 3. Pedigree Inspection, 4. State Quality Inspection. Republic 1. Republic Economy Management Association "Kazpromteplitsa", 2. Associations and "Kazagromeliovodhoz", 3. "Kazselhozvodosnabshenie", 4. Production- Concerns Commercial Concern "Kazahrunokarakul" Unions 1. Farmers Union and Committee of Collective Farms, 2. Trade Union Committee, 3. Republic Union of Horticultural Formations "Zhemis" Others in Head 1. Republic Computer Center, 2. Republic Higher School of Agro-Industry Office, Almaty Complex, 3. Production Association on Construction and Operation of MOA Building, 4. Press Center Research Standard Research Stations (privatized) Expeditions Hydrologic and Land Reclamation Expeditions, Almaty, Chimkent and Kzyl Orda. Regions Regional Agriculture Agencies (19) District District Agriculture Agencies Farns State Farms and Collective Farms - 114 - Annex S REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT SUMMARY OF TERMS OF REFERENCE A. Engineering and Management Consultant l1. The consultant will assist the PIU (and the CWR in dam safety) in the following tasks: Project Planning, Management and Administration Setting up appropriate project accounts and introducing appropriate software for project accounting; (ii) maintaining up-to-date project costs and detailed project implementation schedules and activities for all project components; and (iii) contract administration. 3. Providing training to PIU staff to undertake these duties on their own as soon as possible. Project Identification 4. Identifying sub-projects for implementation starts in Year Three, and as necessary assisting with the replacement of any sub-project currently scheduled to start in Years I or 2. Following initial discussions with the farms, pre-feasibility reports will be prepared for all new sub-projects for which feasibility studies are not yet available. Preparation of Feasibility Studies 5. Preparing (i) updated feasibility studies for sub-projects for which feasibility reports are already available and which are scheduled for implementation; and (ii) preparing feasibility reports for other sub-projects which are or will be selected for inclusion in the IDIP. Field surveys and Project Design 6. Undertaking the necessary field surveys and preparing preliminary designs for feasibility studies and final designs for approved sub-projects based on the planning and design criteria agreed upon between the World Bank and the MOA. Preparation of Environmental Impact Assessments 7. Preparing Environmental Impact Assessments (EIAs) for all remaining sub-projects, based on the Environmental Assessment Guidelines agreed between the World Bank and the MOEB. -115 - Annex S Procurement 8. The procurement of works, goods and services, including but not limited to advertising, preparing invitations to bid, preparing bid documents, undertaking bid evaluation, preparing bid evaluation reports etc. 9. The procurement of equipment and materials for the agricultural and environmental components of the project; specifications for equipment and materials will be prepared by the agricultural and environmental consultants respectively. Construction Supervision 10. The establishment of a construction management organization in Kazakstan for the purpose of supervising the construction of sub-projects. The consultant will assist the local consultants with inspection of the construction works, installation of equipment (including any sprinkler systems) and the testing of construction materials, in order to ensure that the works are implemented and goods supplied in accordance with the designs, specifications and terms and conditions of the relevant civil works and supply contracts. l1. Instructing PIU staff, local consultants and contractors in understanding the conditions and specifications stipulated in the bidding documents and the preparation of bidding documents, and train them in construction management procedures. Farmers' Participation and Setting Up Water Users Associations 12. Supporting the development and implementation of three inter-related components of the project: (i) participation procedures; (ii) water user organizations; and (iii) as a pilot operation, the transfer of the irrigation management of a specific canal command (the Tashatkul command in Dzhambul Oblast) from the public sector the water users. The consultant will assist to develop procedures and pilot efforts; develop training modules; train staff; participate in field implementation activities related to participation procedures and WUAs; oversee monitoring of these components; evaluate pilot efforts; and modify participation guidelines, WUA and irrigation management transfer models and training programs in light of lessons learned during implementation. The consultant will build on the insights and experience in participation and WUA model development gained through initiatives undertaken during project preparation to accomplish the following tasks: * Participation--operationalize participation guidelines; train local P/WUA advisors and field staff in participation techniques, mobilization strategies and technical staff support; develop training modules; train technical field staff in participation guidelines and participation techniques; participate in field implementation; assess field implementation procedures and results; and modify guidelines and training modules as appropriate. * WUAs--refine and implement WUA models developed during project preparation; train WUA field staff in mobilization, communication consultation. facilitation, negotiation and assessment skills; participate in field implementation exercises; develop training modules for field staff, farmers and farm managers; - 116 - Annex S assess and modify WUA pilots and WUA models; prepare plans, procedures and training activities for promulgation and implementation of viable WUA models. * Irrigation Company Pilot--work with the irrigation company study team to develop culturally compatible and socially acceptable procedures and institutional arrangements for an autonomous inter-farm canal management enterprise (based on the water district concept); develop and implement monitoring and evaluation mechanisms that focus on processes, structures and sustainability; help develop mechanisms to generate the support of communities and public sector agencies; conceptualize training modules for various institutional and management roles; based on experience, prepare recommendations for a possible national program. Cost Recovery 13. Preparing, establishing and implementing the agreed cost recovery system, including its rules and regulations, administration, financial management and reporting system. Project Monitoring and GIS 14. Advising the PIU and the Expeditions to monitor project performance indicators as agreed with the World Bank. For this purpose, the consultant will prepare a Performance Monitoring and Evaluation Information System (PIS). A GIS based IDIP Performance Information System (PIS) should be developed to store and process the data. Initially, the PIS should be prepared for a typical sub-project such as Chengeldy. Once the GIS database structure and analysis procedures are established, the PIS should be turned over to monitoring and evaluation units for implementation. The necessary training and technical assistance should be provided to those units to enable them to carry out these tasks. Study Tours 15. Arrange annual international study tours in the areas of farmer participation, farm management, environmental aspects of irrigation and drainage, construction management and dam safety. Participants will be selected from PIU, MOA, various government agencies involved in the implementation of IDIP, the participating design institutes, and the participating farms. The study tours should be limited to 10 to 14 day durations. B. Farm Management and Training Consultants 16. Background. Under the project, the Agricultural Development Component will be implemented in parallel with the planning and implementation of the rehabilitation of the irrigation and drainage facilities. Therefore, the consultant will have to coordinate its work program for the Agricultural Development Component closely with the Engineering Component of the project. MOA's Project Implementation Unit (PIU) will facilitate such coordination. The Agricultural Development Component includes a pilot: Farmers' Participatory Training and Information Services Program. 17. Farmer Participatory Training and Information Services. Main objectives of the assignment are (i) train the local trainers in effective participatory training methodologies and approaches, (ii) to prepare farmers' training modules in modern farm management and the application of improved - 117 - Annex S production technologies (as suggested in Tables 1-3 of Annex J); and (iii) to implement part A of the Agricultural Development Component during the first three years of project implementation. It is estimated that the assignment will require some 300 person-months of foreign and local consultants. 18. As part of their assignment the consultant would procure under their contract, the training and other equipment immediately needed for the Information Services Program (Annex J, Table 5). Demonstration equipment and production inputs will be procured through the PIU/MOA. Scope of Work 19. Participatory Training. The consultant will: (i) identify a core group of (young) dynamic, local trainers from different institutions (MOA, KIMEP, etc.) to be trained within the first 3 months after mobilization of the consultant, in effective western training methodologies and in becoming effective "trainers of trainers" and facilitators in round table training sessions on farm management practices, business planning, and the application of more productive new farm technologies; the training and guidance of trainers should be a continuous process over the three years of the consultant assignment; (ii) start immediately with the preparation of the most urgent training modules in the Russian and/or Kazak language for the four identified target groups (see Annex J) and prepare a time schedule for the preparation of the remaining training modules, as suggested in Annex J, over the first 12 to 15 calendar months; the consultant is to expect modifications and a change of emphasis over time; (iv) start with the first short training courses 3 months after date of assignment. The training program should be considered as an evolving program activity over three years and should be based at all times on the direct needs of the identified target groups; (v) prepare nationals involved in the program to gradually take over all responsibilities from the lead consultants after two years of implementing the program; and (vi) organize a workshop after two years to review the effectiveness of the training program and modify approaches and content, where needed. 20. Demonstrations. In consultation with MOA/PIU and AAS specialists, the consultant will (i) identify which technical demonstrations would be most needed and useful to the farmers in the sub- projects under implementation, to increase on-farm economic production; (ii) take into account the limited budget and suggestions as provided in Annex J, decide on the types of demonstration equipment and production inputs to be used; (iii) agree on where would the demonstrations be carried out over the three years; (iv) discuss with farm managements how they themselves will run and evaluate the demos; (v) and organize farmers' field days around the demo's. The demo program should be considered part of the overall farmers' training program and the results and benefits should be made public by the newly established Farmers Information Services Desk in MOA, using all possible news and broadcasting media available to MOA. 21. Farmers'Information Services. In consultation with PIU and MOA's Press Center, the consultant will: (i) assist MOA in establishing a central "Farmers' Information Services Desk"; (ii) assist MOA and AAS specialists in developing technical notes, brochures and pamphlets related to modern farm management, restructuring, agro-business development, efficient production technologies, marketing and pricing issues, etc.; (iii) assist the "Desk" and the Press Center on the development of technical video's for farmers' training and broadcasting; and (iv) assist MOA in the dissemination by TV, radio and two weekly agricultural newspapers of relevant information and news which would be of great actual interest to the whole farming community in the country, and in the sub-project areas in particular, including information derived from international sources. - 118 - Annex S E. Environmental Consultant General 22. The overall objectives of the Environmental Component are to: (i) promote environmentally sustainable and sound agricultural development by introducing environmental criteria into irrigation and drainage planning; (ii) encourage and support environmental institutional development in the sector, and (iii) support and strengthen environmental management, including monitoring and protection; and (iv) assist the Government (MOA and other environmental agencies) to implement an Environmental Component and the IDIP as a whole in an environmentally sustainable manner. Duration of the consultant's assignment would be about 12 months. 23. The consultant will be required to assist the PIU and the Environmental Unit (EU) in the MOA and relevant environmental agencies to implement the Environmental Component, including institutional development, monitoring and mitigation activities. This will involve: (i) Reviewing current national environmental policies, legal and institutional framework, management and monitoring practices in relation to agricultural (including irrigation and drainage) programs and project development and implementation; and (ii) Review the proposed scope of the IDIP and project specific activities, as well as the SEA and two projects specific ElAs that have been prepared, especially with respect to their recommendations for environmental institutional development and management, and implementation of monitoring and mitigation plans. Institutional Development and Strengthening The consultant will: 24. Review the current national investment and environmental policies, programs and legislation as they pertain to the EA (EIA/SEE) of the agricultural sector. Recommend to MOA and MOEB on how to resolve any outstanding EA (EIA/SEE) legal issues identified and assist with the drafting of relevant procedures, guidelines and manuals. 25. Review the MOA and MOEB institutional framework on the federal and oblast (provin- cial) levels for environmental management and protection, including EA (EIA/SEE). Examine their functions, strengths and weaknesses in the context of EA (EIA/SEE) implementation, coordination and enforcement in the agricultural sector with particular focus on irrigation and drainage. 26. Review organizational and functional responsibilities of different departments under the MOA, propose any additional recommendations for the TORs for an environmental unit under the MOA and support its establishment through technology transfer and office equipment. 27. Evaluate the needs for strengthening EA (EIA/SEE) policy and legal requirements and procedures, and strengthening of inter- and cross-sectoral linkages for coordination and implementation. - 119 - Annex S 28. Participate in any task forces created for drafting EA (EIA/SEE) legislation, procedures and guidelines for the agricultural sector, particularly for irrigation and drainage, to provide legal and management advice. Environmental Training 29. Review and adjust the proposed (under PPF) environmental and Integrated Pest Management (IPM) training program and ensure its consistency with the broader agricultural training program offered under the IDIP and with any existing national sectoral and environmental training programs, as well as with training offered through the Economic Development Institute (EDI) of the World Bank. 30. Review the institutional mechanisms on the national and oblast (provincial) levels for delivering environmental and IPM training in the sector and define the initial group of trainers under the "train the trainers" approach. Identify any additional needs for addressing the main deficiencies in existing training programs in order to strengthen implementation of the proposed training program, taking into account ongoing legal developments in the agricultural and environmental sectors, including EA and IPM. 31. Implement an environmental and IPM training program for the agricultural sector, and the irrigation and drainage sub-sector in particular. The program should be designed as a sustainable operation during project implementation and after its completion and may be based on service charges, necessary incentives, etc. The training program should be designed in such a manner that attendees provide feedback evaluation; further courses should be designed taking into account the attendee evaluations and evolving needs of the field sampling program. Seminar on Harmonization of Environmental Assessment Procedures between the World Bank and Kazakstan 32. It was agreed by the Bank and the Ministry of Ecology and Bioresources (MOEB), on behalf of the Republic of Kazakstan, that an Environmental Assessment Seminar (EA Seminar) (3 days) will be organized with participation from the Bank, MOEB, sector ministries, Government, Parliament, non-government organizations (NGOs) and would take place in Almaty, Kazakstan. 33. The objectives of the EA Seminar are to: (i) improve the understanding of the environmental, economic and social issues involved in EA; (ii) provide an overview of the Bank's generic and technical principles and procedures concerning EA; (iii) review the present legislation, regulations and procedures of the Republic of Kazakstan to determine areas of future cooperation and assistance; (iv) discuss ways to avoid delays in project processing in various lending sectors; and (v) carry out cross- sectoral discussions of EA issues. High level staff and decision-makers from the Bank, MOEB, Kazakh Government, sector ministries, Parliament, NGOs and MOEB Oblast Committees will be attending the EA Seminar. The seminar should be designed to follow up on the comprehensive discussions between the officials of the Bank and MOEB on the issues of coordination and to resolve current and potential EA related problems. 34. The consultant should finalize and implement all organizational arrangements with the Kazak MOEB as well as ensure timely translation and publication (printing) in a binder form of all relevant documents provided by the World Bank and MOEB to be presented at the EA seminar. The -120 - Annex S Consultant should agree with the World Bank and MOEB on the translators (editors) and interpreters to be hired. Support and Development of Water/Soil Quality Monitoring and Agro-Meteorological Programs 35. Review the current legal and institutional framework for environmental monitoring as that relates to agricultural sector, including irrigation and drainage, and different environmental media. Identify existing deficiencies, weaknesses or advantages of environmental monitoring programs, systems, methods and standards rooted either in legal or organizational framework. Review and evaluate technical, human and financial constraints of sustainable environmental monitoring system. Recommend any additional costs for preserving and implementing the environmental monitoring system as recommended by the SEA and further analysis under the PPF. 36. Evaluate priority requirements for strengthening the existing monitoring system limited to the priorities, scale and scope of the project and recommend any additional stationary and field monitoring programs for surface and ground water quality and quantity, soil contamination, agro-chemical residues and quality control of agricultural inputs/outputs, agro-meteorological programs and system strengthening. Recommend any necessary adjustment of existing environmental monitoring systems and programs from both legal, organizational and spatial distribution point of view. 37. Participate in any task forces created for improving current environmental monitoring systems in the country to provide advice and foreign experience on the most applicable practices. Disseminate information on international practices, and provide training to the staff of the relevant agencies based on recommendations of your work. 38. Review a proposed (under the PPF) coordinated environmental monitoring system, evaluate monitoring parameters limited to the operations of irrigated agriculture and prepare a list of urgently required analytical equipment, spare parts and chemicals focused on the scope of the IDIP in a number of pre-selected provinces in the country. Purchase and install selected equipment and provide necessary O&M training. Pilot Clean Drainage Water and Afforestation Plan 39. The project objectives are to: (i) to prevent and mitigate any potential negative environmental impacts from irrigation and drainage systems rehabilitation and improvement by implementing on a pilot basis "clean drainage water project"; (ii) protect agricultural land from wind and soil erosion, and address other environmental concerns through implementing an afforestation plan. 40. Further review and implement a technical proposal for a pilot "clean drainage water project" evaluated under PPF and provide necessary recommendations and conmments on: feasibility, scope and areas for project implementation. Ensure that the PIU obtains necessary permits at the national and oblast level necessary for project implementation and coordinate these activities with the Inter-ministerial Coordination Committee (ICC) for the IDIP. Agree on project implementation institutional arrangements. 41. Further review and support implementation of a technical proposal for carrying out an afforestation plan evaluated under PPF and provide necessary recommendations and comments reflecting any legal or institutional changes which could affect project implementation. Evaluate the capacity of any - 121 - Annex S local organization with a potential to participate in project implementation and agree on any necessary institutional and technical arrangements for implementation. Coordinate activities under the project with MOA, PIU and ICC for the IDIP. Support for Special Environmnental Studies 42. To review the Sectoral Environmental Analysis (SEA) and project specific Environmental Impact Assessments (ElAs) and their recommendations for special environmental studies to support routine environmental monitoring and mitigation activities to be implemented under the IDIP. 43. To review the current national agricultural and environmental policies, programs, legislation, standards and requirements as they pertain to sound environmental protection, including monitoring and mitigation, and IPM in the sector. 44. To review the current sectoral and environmental research framework, including institutions, programs and capacities, as it relates and supports implementation of environmentally sustainable agricultural development. 45. Examine any existing strengths, deficiencies and weaknesses of relevant environmental research programs supporting environmentally sustainable agricultural development in the country and recommend and develop any priority research studies and plans, in particular focused on cost effective methods to prevent salinity and water-logging of soils, reclamation of saline soils or alternative land use and pesticide residues migration in the natural environmental cycle, limited to the scope and regions of the IDIP implementation. - 122 - Annex T REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT MINISTRY OF ECOLOGY AND BIOLOGICAL RESOURCES (MOEB) ORGANIZATION Responsibilities. The Ministry of Ecology and Biological Resources (MOEB) was established by Presidential Degree No. N 679, 16 March 1992 and a decree of the Cabinet of Ministers, No. N 216, 11 March 1992. It is the successor to the State Committee on Ecology and Nature Use and the Ministry of Forestry. It is a planning, management, and monitoring agency mandated to promote the protection and rational use of natural resources. It has the following functions: * pursuing unified State policy in respect of environmental protection, regulating rational nature use and conservation and reproduction of natural resources. * organizing and implementing of State control in the area of environmental protec- tion and rational nature use in accordance with the Law "On Natural Environ- ment Protection in the Kazak SSR". = adopting measures stipulated by the Law for remediation and improvement of ecological situation, living conditions, preserving ecosystems, landscapes, and other environmental facilities in the territory of Kazakstan. * developing of long-term state complex and special programs, indicative plans on environmental protection and rational natural resources use. developing, implementing and improving of economic mechanism for nature use. * implementing State Ecological Expertise of projects, standards, projections, pre- planning, and project documentation. coordinating of study and control over radio-ecological situation in the Republic, organizing collection, processing, transportation, and disposal of radioactive waste. * organizing of ecological knowledge dissemination within the society, encouraging citizens' awareness and activity for environmental protection and resources conservation. * providing scientific, methodological, and organizational guidance for rational bio-resources use and environmental activities in the Republic. * maintaining international cooperation in the field of environmental protection. 2. Organization. The Ministry of Ecology and Biological Resources has a vertical structure, with divisions at the national, oblast, and district levels. It has divisions for ecological inspection, - 123 - Annex T wildlife protection, fisheries management, scientific research. The total staff of the ministry at the national level numbers around 100 persons. The oblast offices contain 25 to 50 persons each, district offices 3 to 5, and city offices 10 to 15. The ministry manages seven national parks. 3. Capability. The MOEB is a relatively young organization and as such has had little time to chalk up real accomplishments. It inherited some capable staff from its predecessor agencies, with considerable knowledge of the resources for which the ministry is responsible. Like its sister agencies, it depends on the national treasury for funding and is severely curtailed in all aspects of its mission. 4. The ministry has undergone four reorganizations since its founding. The acquisition of trained specialists for most divisions remains a problem, and is likely to continue until the economy improved; then it is likely to lag behind some other line agencies. Laboratory facilities are reported to be antiquated and ill-equipped, hindering the accomplishment of basic data gathering and enforcement. State Ecological Expertise ( SEE ) 5. The law "On Environmental Protection" has provided for mandatory SEE prior to making any development decision; public and private financing of a project could start only after obtaining a positive conclusion of SEE. Supportive implementation guidelines and requirements are provided in a number of Government resolutions and MOEB instructions. All development programs, plans, project designs, rehabilitation and improvement projects together with environmental impact assessments are subject to SEE. All projects with foreign investments are subject to SEE at the national level. 6. MOEB Main Department for SEE and Radiological Safety is responsible for normative requirements and guidelines for EIA and SEE. The department has about 25 regular high level and technical staff and also contracts external experts to conduct SEE. Each MOEB oblast committee has a SEE unit with 3-5 staff in it and they serve both municipalities and rural areas. It is the Government resolution which provided for payments for conducting SEE by a projects proponent State Ecological Inspection ( SEI ) 7. SEI is a organizational entity within MOEB with the prime responsibility for state environmental control to ensure compliance with existing legislation, standards, requirements and conclusions of SEE. SEI issues licenses and permit for use of natural resources, disposal of industrial, municipal and other wastes, emissions and discharges of pollutants. It assesses fees and fines for use of natural resources and for pollution of the environment, as well as clears on behalf of MOEB permits for special surface and underground water use, importing of agro-chemicals, etc. SEI controls: handling, storage, transportation, use, distribution, etc. of pesticides, herbicides and other agro-chemicals; ensures compliance with national environmental legislation in order to prevent pollution. It also controls compliance with water legislation and appropriate operation and maintenance of irrigation and drainage systems 8. National office of SEI has about 20 people grouped into four divisions and there are SEI units in all 19 oblast committees of MOEB with total staff of about 350. SEI also runs a number of analytical laboratories. - 124 - Annex U REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT MONITORING INDICATORS FOR PROJECT SUPERVISION 1. During project implementation, a comprehensive set of indicators will be monitored to gauge project implementation and impact. The following table lists a sub-set of specific input, output, outcome, and impact indicators that were agreed with Government during negotiations. This subset of agreed impact and output indicators will be used by the Bank throughout implementation as measures of project implementation performance (IP ratings). In addition to the indicators for project supervision, the more detailed set of monitoring indicators for the project are included for reference. A. Input & Process Indicators Measure Responsible Agency Availability of counterpart funds Allocation to MOA Ministry of FinancelPlU budget l Technical assistance for engineering & letters of invitation, PIU supervision, the agricultural development bids invited and component and strengthened environmental evaluated, contracts monitoring awarded, consultant assignments completed Training of trainers, training courses developed, numbers MOA participants trained and rayons reached Demonstration activities designed and numbers MOA undertaken, audience reached, rayons covered Information Services provided (ratio and TV numbers MOA broadcasts, videos prepared, pamphlets distributed) Establishment of EU in MOA, design and numbers PIU, MOA, MOEB preparation of training courses, workshops and seminars, equipment and chemicals for monitoring - 125 - Annex U B. Output and Impact Indicators Measure J Unit J Irrigation and Drainage systems rehabilitated number of hectares PIU New production technologies adopted and new numbers MOA enterprises established EA documents, EIA/SEEs produced, and number, quality MOA, MOEB, PIU training workshops, and seminars undertaken, monitoring sites operating Improved agricultural performance on production Expedition rehabilitated irrigation and drainage schemes (tons/scheme) yields (kg/ha), water productivity (yield/unit of water) Improved performance through training ha's, yield (kg/ha) MOA (cropping patterns changed, yield increases from new technologies) Strengthened environmental policy and planning Quality of PIU, MOEB capacity environmental input into policy analysis and investment discussion machinery Strengthened environmental monitoring Improved availability PIU, MOEB of data for monitoring environmental input - 126 - Annex U DETAILED PERF ORMANCE MONrrORING INDICATORS A. Input Indicators Measure T Agency Irrigation and Drainage Component Availability of Counterpart Funds Allocation to Ministry of Budget Finance/PIU TA expenditures contracting - PIU TOR, LOI's, bid evaluation, contract award, consultants on- board Commitment of loan funds for civil works and contracts signed PIU equipment funds expended Agricultural Component TA expenditures Contracting - MOA TOR, LOI's, bid evaluation, contract award, consultants on- board Training Training of trainers; training courses numbers MOA developed, farmers trained; rayons reached Demonstration Demonstrations designed; visits to numbers MOA demonstrations; number of rayons reached Information Services TV/Radio broadcasts; frequency in numbers MOA minutes/week Videos prepared; topics; distribution numbers Farmers' weekly printed issues numbers Info-Bulletins; topics; distribution numbers -127 - Annex U Measure Agency Strengthened Enviromnental Capacity TA expenditures contracting - PIU, MOA, MOEB TOR, LOI's, bid evaluation, contract award, consultants on- board Institutional Development Preparation of EA documents, establishment numbers PIU, MOA, MOEB of EU in MOA, EIA/SEE preparation Environmental TraingiI Workshops, courses, environmental numbers PIU, MOEB harmonization, seminar Hydromet Environmental Monitoring contracts signed Field and testing equipment, equipment Chemicals office equipment delivered - 128 - Annex U B. Output Indicators T | Measure T Agency Irrigation & Drainage Component -- Each Sub-project A. Physical & Chemical Properties Irrigation systems rehabilitated number of hectares PIU Drainage systems rehabilitated number of hectares PIU Overall irrigation efficiency Ratio Expedition Soil salinity Avg. at selected points Expedition Depth to water table Avg. at selected points Expedition Groundwater salinity Avg. at selected points Expedition Land returned to production Area in ha. Expedition B. Participation Milestone 1. Initial program discussion Date PIU Agreement Ratios Attendance 2. Presentation of alternative design Date PIU Agreement Ratios Attendance 3. Final Design Date PIU Agreement Ratios Attendance 4. Completion after performance testing Date PIU Agreement Ratios Attendance 5. Operation and Maintenance Plan Date PIU Agreement Ratios Attendance Agricultural Component 1. Training Farmers trained; how many new numbers MOA enterprises developed; quality 2. Demonstration New production technologies numbers, quality, size MOA introduced -- accepted/adopted of audience 3. Information Services TV/Radio programs - listeners, numbers MOA farmers' weekly; subscribers info- numbers bulletins, number distributed requests for info-satisfied -129 - Annex U Measure | Agency Strengthened Environmental Capacity Institutional Development EA documents prepared, ElIAs/SEE number, quality PIU, MOA, prepared MOEB Environmental Training, Manuals and courses prepared number, quality PIU, MOA, Course, workshop and harmonization MOEB seminar (number undertaken, number of participants) Environmental Monitoring number of sites tested, PIU, MOEB Increased monitoring of soil, quality, soil number of operating contamination, ground water, quality, monitoring stations, water table, improved agro- number of tests, meteorological data collection increased reporting of meteorological data Environmental Mitigation Ha. of surviving forest CF, MOEB Protection forest belts planted Amount of water MOA Pilot clean water initiative implemented cleared (in3) Water quality, cost per m3 - 130 - Annex U C. Impact Indicators Measure Agency ! Irrigation & Drainage Component Agricultural Performance Expedition * Area covered: actual/target ratio Irrigated area performance increased area Cropping intensity performance increased percentage * Agricultural Performance Expedition Production tons/scheme Yields kg/ha Water productivity (yield per unit yield/unit of water of water) Agricultural Component Area covered by trained farmers ha Cropping intensities increased (change of percentage Expeditions patterns) Production - yields increased kg/ha MOA New production technologies accepted numbers Orientation towards market changes More agricultural enterprises developed diversity of system MOA Demand for farmers' extension & increased demand information services acceptance by Spill over of IDIP project activities farmers outside of project area Strengthened Environmental Capacity Institutional Development Improved MOA, MOEB EA, EIA & SEE documents environmental Approval, EU Unit Functioning input into short/long term planning and in investment decision making, improved environmental sustainability of investment projects -131- Annex U Measure Agency Environmental Training Courses, workshops, harmonization Improved MOA, MOEB seminars environmental capacity and expertise, improved decision making, improved EA framework for project preparation Environmental Monitoring Improved data MOA, MOEB availability resulting in more informed decision-making and planning Environmental Mitigation Reduced wind and MOA, MOEB water erosion of soil, improved quality of .__ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ drainage water - 132 - Annex V REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT PROPOSED PROJECT SUPERVISION PLAN Approximate Date of Activity Expected Skill Requirement Staff Input Week September 1996 Supervision Mission Task Manager (Irrigation Engineer) 18 Project Launch Workshop Irrigation Agronomist Environmental Specialist Sociologist Procurement Specialist Disbursement Specialist April 1997 Supervision Mission Task Manager (Irrigation Engineer) 12 Irrigation Agronomist Environmental Specialist Sociologist l October 1997 Supervision Mission Task Manager (Irrigation Engineer) 12 Irrigation Agronomist Environmental Specialist Sociologist/Instit. Specialist l April 1998 Supervision Mission Task Manager (Irrigation Engineer) 12 Irrigation Agronomist Envirornmental Specialist Sociologist October 1998 Supervision Mission Task Manager (Irrigation Engineer) 12 Irrigation Agronomist Envirornmental Specialist Sociologist April 1999 Supervision Mission Task Manager (Irrigation Engineer) 9 Irrigation Agronomist Environmental Specialist October 1999 Supervision Mission Task Manager (Irrigation Engineer) 15 (mid-term review) Irrigation Agronomist Environmental Specialist Sociologist/Instit. Specialist April 2000 Supervision Mission Task Manager (Irrigation Engineer) 9 Irrigation Agronomist Environmental Specialist October 2000 Supervision Mission Task Manager (Irrigation Engineer) 6 Environmental Specialist I -133 - Annex V Approximate Date of Activity | Expected Skill Requirement Staff Input Week April 2001 Supervision Mission Task Manager (Irrigation Engineer) 6 Environmental Specialist October 2001 Supervision Mission Task Manager (Irrigation Engineer) 6 Environmental Specialist April 2002 Supervision Mission Task Manager (Irrigation Engineer) 6 Environmental Specialist October 2002 Supervision Mission Task Manager (Irrigation Engineer) 6 Environmental Specialist April 2003 Supervision Mission Task Manager (Irrigation Engineer) 6 Environmental Specialist October 2003 Supervision Mission Task Manager (Irrigation Engineer) 15 (and PCR preparation) Irrigation Agronomist Environmental Specialist Sociologist Economist - 134 - Annex W REPUBLIC OF KAZAKSTAN IRRIGATION AN) DRAINAGE IMPROVEMENT PROJECT Economic Annex Economic Analysis 1. Quantifiable benefits for the analysis are derived primarily from increases in agricultural production due to: (i) increased efficiency in water use through improved water delivery and irrigation practices; (ii) reversing the declines in yields from water logging and salinity build-up through improved drainage; (iii) expanded area cultivated through reclamation of some abandoned areas; and (iv) higher agricultural productivity as a result of farmers honing water management skills, adopting improved cultural practices, and switching to improved varieties and higher value crops. 2. Yield. For the with-out project conditions used in the analysis are assumed to equal the average for the three years, pre-independence period 1988-1990. Yields since independence have declined significantly since this period due to the protracted economic crisis that has affected input use, fuel supplies and equipment availability. However, broad-based reforms are now underway and for the analysis, it is assumed that by the time the first sub-projects are completed yield levels for the entire sector will return to their historical high levels (Table 1). 3. For the with-project scenario two different sets of assumptions were used: * (Comnprehensive On-farm Imgation and Drainage (seven sub-projects). Yields are expected to increase by between 20-100 percent depending on the crop and climatic and agronomic conditions in the areas where each sub-project is located. Most yield increases are in the 40-60 percent range in the areas where sub- project is located. The with-project assumptions are based on yield assumptions used in original government feasibility studies which drew on data from research farms. These data were then vetted and adjusted during preparation by a team of local and international agronomists. The resulting yields are well below what is considered to be technically feasible and what is achieved under similar conditions elsewhere in the world. It is assumed that full yields in the with- project situation would be achieved in the fifth year, starting from with-out project yields in year one. To test for sensitivity to yield assumptions, rates of return for the seven sub-projects involving comprehensive rehabilitation and drainage were also calculated with yields at full development that were 25 percent lower than in the base case (Table 1). - 135 - Annex W Table 1: Project Yields for Selected Crops (tons/ha) Crop Without Project With Project | With Project Conditions Condions Conditions 25% Reduced Winter Wheat 2.4 4.0 3.0 Winter Barley 2.25 3.8-4.0 2.8-3.0 Maize (grain) 3.6 6.3-6.5 4.7-4.9 Paddy 4.5 5.2 4.8 Maize Silage 25.0 30.0-40.0 30 Alfalfa Hay 6.0 6.0-9.0 6.0-6.8 Sugar Beets 28.0 35.0 28 Soybeans 1.5 2.5-2.8 1.9-2.1 Cotton 2.7 3.2 2.7 Vegetables 17.8 30.0 22.5 Potato 11.0 15.0-20.0 11.2-15.0 Melons 9.2 15.0-22.0 11.2-16.0 Apples 3.5 8.0 6.0 Table 2: Characteristics of the Core Program Sub-Projects Sub-project Type of proposed Area Irrigated Estitnated investment cost Predominant investment irrigated area with (US $ Million) cropping without project . pattern project ha. 1995 Base 2000 Cost used ha. cost in economic analysis Chengeldy JSC CROIL 2368 2250 6.1 6.5 mixed Kzyl - Agash CROIL 1112 1415 4.1 5.5 Export Crop 70 Wells - On-Farm Drainage 6474 7777 4.8 6.6 Export Crop Golodnya Steppe (Vertical wells) (Cotton) Mirny Farm CROIL 1410 1333 4.6 6.5 Mixed Akkumsky Farm CROIL 856 1069 0.7 1.0 Export Crop (Rice) 0 Pritobolskly Joint Venture CROIL 850 850 2.7 3.5 Mixed Dzhambul Farm CROIL 1415 1847 2.2 3.3 Mixed Prirechny Farm CROIL 913 913 1.7 2.3 Mixed 60 years of October Farm On-Farm Drainage (tile 4786 4886 4.4 6.2 Mixed drains) x - 137 - Annex W * On-Farm Drainage Works (two sub-projects). Incremental production is expected from two sources. First, without the investment in drainage, yields would decrease due to increased salinity and water logging. The gradual build- up in salinity could eventually reduce yields to zero. For the analysis it was assumed that the without project yields would decline by one percent per annum over a ten year period and stabilize thereafter. Second, with improved drainage, yield increases could be anticipated. With-project yields were assumed to increase from 10 to 20 percent depending on the crop over the first five years. 4. Area Under Irrigation. The project is limited to rehabilitation of existing irrigated areas so that the area under the with-project assumptions does not include any expansion to newly irrigated areas. However, several sub-projects will involve reclamation of some lands, abandoned because of salinity and/or water-logging. In total about 2200 ha's are expected to be reclaimed (Table 2). 5. Cropping Patterns. Cropping patterns in the with-project scenario were originally developed by local agronomists based on existing cropping patterns, agronomic practices, and crop- rotation practices. These assumptions were reviewed by consultant agronomists during project preparation. Cropping patterns in both the with and with-out cases include considerable amounts of fodder crops. The sub-projects farms have been traditionally mixed livestock and crop operations. This mixed pattern of production is assumed for the analysis to be maintained. Also, fodder crops figure prominently in crop rotation patterns. No attempt has been made in constructing with-projects assumptions to anticipate changes in cropping patterns in response to emerging market signals. However, an optimization procedure was conducted for one of the sub-projects and the results suggested that the assumed cropping pattern may indeed be sub-optimal. 6. Prices. The prices used in the economic analysis are summarized in Table 3. The monetary unit for the analysis is the US dollar. Wheat, rice and cotton are export crops and the relevant price is world market price adjusted for transport to Russian markets. Sunflower, soybeans, and sugar beets are import substitutes and the relevant prices is the import parity price. Kazakstan is a traditional exporter of meat and dairy products and the value of fodder crops (barley, sorghum, maize, silage, and alfalfa) is based on the calculation of estimated net returns to feeding sheep, beef cattle, and dairy cows. The value of livestock products used to estimate the price of fodder units are based on international market price. Each of the fodder crops is converted into fodder units using appropriate feed conversion ratios. Farm gate prices for tradable commodities were derived by using the World Bank projections for year 2000 in 1990 constant price, using the G-5 Manufacturing Unit Value Indices for inflation adjustment. 7. Non-traded goods in the analysis are assumed to include all the fruit and vegetable crops. Prices for the non-traded commodities were updated using the 1995 prices from local markets. The prices of non-tradeable goods and services in Kazakstan are expected to increase significantly in the medium term relative to internationally traded goods to correct for the substantial undervaluation of the real exchange rate of the tenge. The magnitude and timing of the correction is uncertain. For planning purposes and for the economic and financial projections, it is assumed that local costs and prices will increase at a rate of 15 percent per annum over the project implementation period relative to the increases in foreign costs of importable goods and services. Since the analysis focuses on project starts in the next two years and since project construction for each sub-project is expected to take two to three years, all local prices have been adjusted from 1995 levels to the year 2000. -138 - Annex W 8. Given the considerable uncertainty attached to these assumptions, sensitivity analysis was undertaken to test for changes in price levels for local commodities. In the analysis, it was assumed the prices of non-traded fruits and vegetables would rise faster than the prices of traded goods. It is possible that because of the relative price changes, commodities such as fruits and vegetables that are now not traded could potentially become traded. It is also possible that a production response to higher prices could dampen domestic price increases. To test for such uncertainty, prices of non-traded fruits and vegetables were held constant at their 1995 level while local investment costs were inflated at 15 percent per annum throughout the investment period. 9. Economic Analysis. Summary tables showing the economic analysis for two sub-projects are presented below (Tables 4-6). More detailed tables for all sub-projects are available in project files. The calculation of the combined ERR for all eleven sub-projects is shown in Table 7. 10. FinancialAnalysis. Assumptions used in calculating the FRR include: (i) financial prices for output are assumed to be equal to economic prices; (ii) investment costs are adjusted by including value-added tax and import duties to the economic investment costs and subtracting out costs of the agricultural component allocated to each sub-project; and (iii) price of purchased inputs are adjusted to include VAT and import duties. - 139 - Annex W Table 3: Prices used in Economic US$ per Ton Crop | Base | Prices for Sensitivity (Ton) Case Analysis _____________________J(US$)j_________ Wheat 108 Paddy 160 Fodder Unit 136 Barley 92 Maize 95 Sorghum 90 Potato 420 240 Sugar Beets 32 Sunflower 202 Soybeans 316 Onion 420 240 Apples 420 240 Grapes 525 300 Cotton 610 Melons 154 88 Safflower 202 Vegetable 292 167 Selected Input Prices Nitrogen 133 Phosphorus 114 Potassium 90 Fuel 118 KAZAKSI'AN: Irrigation and Drainage Improvement Project Table 4: Chinigeldy Farii Pump #2 Economic Budget (Detailed) (In Dollar '000) Main Production ito 30 f IJ'ithout Project Iis With Project8to19 20 2hPjci r] -ito 3_0Fr I 1 2 __T _3 1 4 T1 6 7 8rol9 20 21 to30 ain Productionl Alfalfalflay 310.8 310.8 201.7 265.3 327.8 391.3 453.9 453.9 453.9 453.9 453.9 Soybeans 36.0 36.0 184.9 221.9 271.2 308.2 345.2 345.2 345.2 345.2 345.2 Potatoes 0.0 0.0 249.4 289.0 328.7 368.4 408.0 408.0 408.0 408.0 408.0 Onion 264.8 264.8 669.0 806.0 939.0 1,072.0 1,209.0 1,209.0 1,209.0 1,209.0 1,209. Vegetables 269.8 269.8 1,193.4 1,401.3 1,602.4 1,810.3 2,011.4 2,011.4 2,011.4 2,011.4 2,011.4 Spring barley 195.7 195.7 177.5 233.0 288.5 343.9 399.4 399.4 399.4 399.4 399.4 Maize 102.6 102.6 128.2 153.2 178.5 203.4 228.4 228.4 228.4 228.4 228. Spring Wheat 71.8 71.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 sub-total - Crops 1,251.6 1,251.6 2,804.2 3,369.7 3,936.1 4,497.6 5,055.3 5,055.3 5,055.3 5,055.3 5,055.3 By Products Crop Residues 130.3 130.3 99.7 119.1 140.6 160.6 179.5 179.5 179.5 179.5 179.5 O ross Value Of Production 1,381.9 1,381.9 2,903.9 3,488.8 4,076.8 4,658.2 5,234.8 5,234.8 5,234.8 5,234.8 5,234.8 roduction Cost Investment Investment . 6,461.9 .- - -. 166.0 - 249.0 Operating Purchased Inputs Seed 69.5 69.5 146.2 147.9 148.8 150.4 152.0 152.0 152.0 152.0 152. Fertilizer 89.3 89.3 123.6 144.2 163.3 183.6 203.9 203.9 203.9 203.9 203. Traction and Implements Depreciation and Rep 317.2 317.2 295.1 295.1 295.1 295.1 295.1 295.1 295.1 295.1 295.1 flerbicides & Insecticides 101.0 101.0 115.1 138.1 161.1 181.3 201.4 201.4 201.4 201.4 201.4 Fuel 90.4 90.4 83.8 83.8 83.8 83.8 83.8 83.8 83.8 83.8 83. O&M - 6.1 6.1 6.1 6.1 6.1 6.1 6.1 6.1 6.1 6.1 Sub-Total Purchased Inputs 667.4 673.5 769.9 815.3 858.2 900.3 942.3 942.3 942.3 942.3 942.3 Labor Farm Labor 70.3 70.3 100.4 100.4 100.4 100.4 100.4 100.4 100.4 100.4 100.4 Sutotal Operating Costs 737.7 743.8 870.3 915.7 958.6 1,000.7 1,042.7 1,042.7 1,042.7 1,042.7 1,042. ub-Total Production Cost 737.7 7,205.7 870.3 915.7 958.6 1,000.7 1,042.7 1,208.7 1,042.7 1,291.7 1,042.7 OUTFLOWS 737.7 7,205.7 870.3 915.7 958.6 1,000.7 1,042.7 1,208.7 1,042.7 1,291.7 1,042. Cash Flow 644.2 -5,823.8 2,033.6 2,573.1 3,118.2 3,657.5 4,192.1 4,026.1 4,192.1 3,943.1 4,192.1 Economic Rate of Retum= 37% NPV (USS Million) = 15.7 - 141 - Annex W Table 5: Chingeldy Farm Pump #2 Cropping Patterns (in Units) Without Project With Project Unit I to 30 2 to 30 Cropping Pattern Existing Technology Potatoes ha 0 54 Spring Barley ha 408 370 Maize ha 296 370 Alfalfa Hay ha 1140 740 Vegetables ha 52 230 Onion ha 38 96 Soybeans ha 76 390 Spring Wheat ha 358 0 Sub-total L 2,368 | 2,250 -142 - Annex W KAZAKSTAN: IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT Akkumskiy SF Area Model Table 6: Economic Budget (Detailed) (In Dollar'000) April - March Without Prje 17h I to 30 1 1 2 3 4 S 6 7to 30 Main Production Rice 305.0 305.0 256.7 270.9 285.1 298.8 313.0 313.0 Alfalfa Hay 77.1 77.1 97.0 127.6 157.7 188.3 211.4 218.4 Potatoes 23.1 23.1 23.1 26.8 30.4 34.1 37.8 37.8 Vegetables 25.9 25.9 25.9 30.5 34.8 39.4 43.7 43.7 Spring barley 33.6 33.6 42.7 56.0 69.4 82.7 96.1 96.1 Maize - - 30.8 36.8 42.9 48.9 54.9 54.9 Spring Wheat 14.0 14.0 17.8 21.8 25.7 29.7 33.6 33. ub-total Main Production 478.8 478.8 494.2 570.4 646.1 721.8 797.5 797.5 By Products rice straw 26.0 26.0 21.9 23.1 24.3 25.5 26.7 26. Maize stalks - 17.7 21.1 24.6 28.1 31.5 31.5 Spring Wheat Straw 13.0 13.0 16.5 21.6 26.7 31.9 37.0 37. ub-total Byproducts 39.01 39.0 56.1 65.8 75.6 85.5 95.2 95.2 Gross Value Of Production 517.8 517.8 550.2 636.2 721.8 807.4 892.7 892.7 roduction Cost Investment Akkumskiy 962.2 - - - - Operating Purchased Inputs Seed 49.8 49.8 48.7 49.5 49.9 50.8 51.6 51. Fertilizer 28.0 28.0 37.0 40.3 46.5 51.6 56.5 56. Tractors & Machinery 123.3 123.3 140.4 140.4 140.4 140.4 140.4 140. Herbicides & Insectisides 61.5 61.5 57.1 64.5 67.1 75.5 77.5 77.5 Hauling 28.9 28.9 32.3 35.7 39.2 42.7 46.1 46.1 Fuel 42.6 42.6 49.6 49.6 49.6 49.6 49.6 49. OMR - - 22.1 22.1 22.1 22.1 22.1 22.1 Sub-Total Purchased Inputs 334.2 334.2 387.3 402.2 414.9 432.7 443.8 444.3 Labor Annuanl labor 39.2 39.2 40.0 40.0 40.0 40.0 40.0 40. Sub-total Operating Costs 373.31 373.3 427.2 442.2 454.9 472.6 483.81 484. ub-Total Production Cost 373.31 1,335.6 427.2 442.2 454.9 472.6 483.8 484.2 OUTFLOWS 373.31 1,335.6 427.2 442.2 454.9L 472.6 483.8 484.2 ash Flow 144.41 -817.8 123.0 194.0 266.9 334.7 408.9 405 IRR = 17.6%, NPV = 520.29 - 143 - Annex X REPUBLIC OF KAZAKSTAN IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT SECTOR ENVIRONMENTAL ASSESSMENT Summary 1. This report has been prepared at the request of the Government of Kazakstan as part of the environmental program of the Kazakstan Irrigation and Land Reclamation Project in preparation to meet environmental assessment requirements of Kazakstan and the World Bank. It is intended to evaluate current environmental conditions in the irrigated agriculture sector of the Republic of Kazakstan and to predict environmental benefits and mitigation of adverse effects that may be expected to result from ongoing and proposed improvements in irrigated agriculture on as many as 24 farm systems covering 126,577 hectares. 2. Kazakstan may be considered a steppe nation, with large areas of short-grass plains and hills, bordered on the south by mountains. Lying near the center of the Eurasian land mass, it has a typically continental climate, with cold, dry winters and hot dry summers. Annual precipitation (Map 3) in the agricultural lowlands varies from less than 150 mm in the extreme southwest oblast of Manghystau, the lower Syr Darya basin, and the edge of Lake Balkhash to nearly 450 mm in the foothills of the southern mountains and a few areas in the north and east. In a most areas, some rain falls in every month, with greater amounts in late winter or early spring. In the far northeast of the country, the peak tends to be later, in July or August. On average, two out of five years are considered drought years, requiring irrigation for viable cropping. On the basis of rainfall and temperature (degree-days above I0`C and frost-free days), the country is divided into nine agro-climatic zones, with some subdivisions. 3. The majority of Kazakstan's rivers are contained in the closed basins of the Caspian and Aral Seas and Lakes Balkhash and Tengiz. Only the Ob, Ishym and Tobol basins drain into the Arctic Ocean. The largest,the Irtysh, Ural, Syr Darya, and Ili, originate in the mountain systems (the Altai, Urals, Trans-Ili, Alatau, and Tian Shan) that border the country or are in the neighboring states. Nearly all types of flow regimes are represented in the rivers of Kazakstan. In central and western Kazakstan the rivers are shallow and flood in spring, but dry out in summer or are reduced to salty stretches. Many depend largely on snow melt and flow into desert lakes that become highly saline or dry out entirely in summer. Such rivers tend to have two periods of flooding, in spring and in late summer. With storage reservoirs, these glacial rivers have great industrial and irrigation potential, as well as producing hydroelectric power. In such rivers, rainfall and groundwater outflow may provide only 5 to 15 percent of the annual discharge. 4. Glaciers represent large reservoirs of clean fresh water. In the Republic, glaciers are found in the Altai, Dzhungar, Terskey Alatau, Transilik and Kirghiz Alatau, and Talas Alatau. Collectively, these mountains contain 2,724 glaciers more than 0.01 km2 in area, with a total area of 2,033 km2. They contain approximately 100 km3 of water and yield about 2 km3 (2,000 million cubic meters) of meltwater annually with about 0.04 g/L of salts. Most glaciers are gradually melting back. 5. Not counting the Caspian and Aral Seas, Kazakstan has 48,262 standing water bodies one hectare or more in area. Collectively, they contain more than 190 km3 of water. The 21 largest contain - 144 - Annex X 26,886 km2 of surface area, approximately 59 percent of the standing water surface of the Republic. Research in northern Kazakstan by the State Hydrologic Institute (St. Petersburg) showed that the diversion of water from lakes is possible only in years with medium to high rainfall. The smaller lakes, therefore, cannot be a guaranteed water supply for industry, cities, rural settlements, and irrigation systems. Most lakes in Kazakstan are not suitable for drinking, and many are unsuitable for irrigation. Less than 30 percent can be considered completely fresh (less than 1 g/L total salts), while slightly over half are weakly saline (1-5 g/L) or moderately saline (5-25 g/L). 6. Due to the highly irregular flow of most rivers, their development for economic uses is only possible through streamflow regulation by storage reservoirs. Many rivers, especially the larger ones, have been provided long-term and seasonal regulation by reservoirs and storage ponds. Large reservoirs such as Buhtarma, which is among the largest in the world, with a capacity of 44.6 km3 and a surface area of 5,490 kM2, were developed with advanced construction technology. In addition to their primary objectives (water supply for industry, population centers, energy production, or irrigation) most also are used for fish production and recreation. At present Kazakstan has 204 reservoirs, with a total capacity of 95.5 km3 and a total area in excess of 10,000 kmn2, including 22 that provide long-term water supply. 7. Groundwater is more protected than surface water and is less affected by human activities. Out of 601 identified aquifers, 556 are suitable for drinking and household water supply. The remaining 45 are not suitable for drinking but are suitable for mineral baths and other medical purposes. The reserves of fresh and slightly mineralized groundwater could supply 42.5 million m3/da, most of which is located in the southeast portion of the country (Taldykorgan, Almaty and Dzhambyl Oblasts). 8. A total of 7 million m3/da of groundwater is diverted for human use, including 50.5 percent for drinking water supply, 31.5 percent for industrial needs and 18 percent for irrigation. Most groundwater use occurs in South Kazakstan, Almaty and West Kazakstan Oblasts, especially near the foothills and mountain depressions and around rock and sand rock massives. There are 2,200 artesian wells with a total capacity of 1.2 million m3/da. Irrigated agriculture is among the main sources of groundwater pollution, along with industry, mining and mineral processing, cattle breeding farms, storage of solid and liquid wastes, and petroleum products. Agricultural pollution of ground water is most prevalent at Taldykorgan Oblast (Karatal, Kerbulak, Alakul and Panfilov Massives) where organochlorine and organophosphate pesticides occur at concentrations of 0.003 to 0.03 ppm (mg/L). 9. Kazakstan also may be divided into eco-climatic zones, on the basis of natural climax vegetation. The most frequently used classification for lowland regions recognizes forest-steppe, steppe, arid steppe, semidesert, desert, and foothill desert. Designated forest areas constitute only 3.7 percent of the total area of the Republic. Some planting of trees on state land is underway, with the stated goal of the Forest Institute the increase of area to 4.6 percent of the national area. 10. For ecological purposes, soils may be considered in terms of eco-climatic zones. In northern Kazakstan, the prevailing zone is forest-steppe, with gray or black highly weathered soils characterized as Chernozem soils. In the central part of the country, covering some 30 percent of the total area of the Republic, are soils that are dark to light chestnut in color. In the south, occupying approximately 40 percent of the national area, are brown to gray-brown, "takyr-like" desert soils. The content of organic matter declines from 7-8 percent in the north to 0.3-0.5 percent in the south. Gross nitrogen and phosphorus levels drop from 0.4 and 0.12 percent to 0.01 and 0.01 percent, respectively. Cation exchange capacity declines from 40-45 to 10-15 mg/eq/100 gm. Over the same distance, the soils - 145 - Annex X tend to become more alkaline, pH rising from near neutral (6.8-7.0) to moderately alkaline (7.5-8.3). In the drier areas, the salt content of the native soil increases, leading to a vulnerability to surface salinity problems under conditions of poor ground water management All the soils of Kazakstan are weak in the hydrolyzed compounds of zinc, molybdenum, and cobalt, average in copper, and well provided with manganese. In South Kazakstan, some areas show high levels of boron and/or soda-sulphate. 11. Studies of Kazakstan soils indicate that 26 percent of the surface of the country may be considered erosive (Borovsky, 1976). This means that slightly more than 700,000 km2 of land is vulnerable to erosive loss. Of this area, the fraction subject to wind erosion, about 525,000 km2, is about three times larger than that subject to water erosion, about 177,000 kmi2, as might be expected in a country with relatively low rainfall. In the few oblasts where erosion by water predominates, the total percentage of erosivity is not high, less than 2 percent, whereas in the drier oblasts 5-8 percent of the area is considered vulnerable to erosion. 12. Kazakstan has an average population density of 6.4 persons per square kilometer, making it one of the most sparsely populated countries in the world. Its place at the meeting of the Slavic and Moslem worlds has contributed to its ethnic diversity. Of the 14 ethnic/national groups represented in the Republic, the dominant ones are Kazaks (42 percent), Russians (37 percent), Other Slavs (5 percent), and Germans (5 percent); the remaining 11 percent is made up of a large variety of national origins. Kazaks are the most numerous in rural areas of the southern, southwestern, and southeastern parts of the country, while ethnic Russians make up 80 percent of the population in the northern, western, and eastern parts. Forced resettlement of Germans occurred until 1954, largely in the rural areas of western, northern and central Kazakstan. Uigurs are strongly represented in the southeast, especially in Almaty and Taldykorgan Oblasts. 13. The concept of providing an artificial water supply for agriculture dates back to ancient times, but the quantification of irrigation requirements began officially around the beginning of this century. In 1915, 696,000 ha of land was considered to require irrigation. By 1988 this had increased to 2,321,000 ha. In the 1970's and 1980's there was not only an increase in the area irrigated but also technical upgrading of existing systems: lining of earth canals to prevent seepage, land grading to improve efficiency, mechanized application using broad-armed sprinkler systems, and the construction of closed irrigation systems. The engineers began to include soil water salinity predictions and optimization, analogue computation of ground water flow, and computer data treatment in planning new systems. Predictions of water quality and environmental protection began to enter the planning in the 1990s and in 1991 the assessment of environmental impacts became a mandatory part of the planning process. During this era the reuse of irrigation drainage water became a requirement. 14. Water losses through seepage, poorly designed, poorly maintained, or absent drainage systems, and the use of high salinity water have caused severe deterioration of growing conditions on many farms. Waterlogged and heavily salinized lands can be found in all regions of the country, although the distribution of such conditions is irregular. Even in the northern parts of the country, deterioration of land accounts for 5-10 percent of the area; in the southern regions the figure is 30-40 percent. 15. Declines in the amount of total harvest and sharp declines in harvests of valuable fish species occurred during the period of intensive development of agriculture, industry and hydroelectric power. Consumptive water uses caused decreases in water levels, pollution, mineralization of water, and drying of many shallow lakes that were formerly valuable fish nursery areas. A lack of fish protective - 146 - Annex X devices on some headgates and ineffective use on others resulted in losses of young fish that were carried along with water withdrawals. 16- The most adverse fishery impacts of irrigation were observed at the Aral-Syr Darya Basin anid Lake Balkhash. The Aral-Syr Darya Basin has lost its industrial importance. The harvest has decreased to one sixth of the tonnage during the late 1950s and early 1960s. Balkhash Lake harvests in the 1960s were 16,000 tons per year, but were only 9,422 tons in 1991. 17. Water resources of the Syr Darya basin are almost exhausted. Discharge from Chardara reservoir on the Kyrgyzstan border is limited by channel encroachments on downstream settlements. Thus, when water exceeding this limited capacity is available, it is diverted to evaporate in Lake Aydarkul. a blind basin in the desert. Four additional dams in Kazakstan also do not have the capacity to pass high flows. During the past several years, water has not reached the mouth of the Syr Darya river, whiclh has resulted in serious changes for delta wildlife. The delta has not flooded since 1964. 18. Ground water in the lower Syr Darya basin regularly is found to contain residues of the insecticides l)DT and benzene hexachloride and the herbicide 2,4-D in excess of allowable limits. A smnall percentage (less than 0.3 percent) of foodstuffs from the same region analyzed in 1992 also contained DDT in excess of allowable limits. The presence of these chemicals more than two decades after their supposed removal from use is indicative of serious indifference on the part of farm managers to the environmental and health effects of the chemicals. Frequently the chemical applied, the method of application, or the timing is inappropriate for the target pest, but the chemical is used because it is available where the needed one is not. The training of field agronomists has not kept up with advances in pest control, and new chemicals often have been distributed without adequate instructions and cautions. The UNEP notes that during the 1980s in the Aral Sea drainage, the application of pesticides in general remained heavier than elsewhere in the former Soviet Union. In much of Kazakstan, the decline of pesticide use in recent years has been due to shortages of funds, problems of supply, and lack of operable equipmenit. 19. Fortunately, there already is considerable interest on the part of the public and of governmenit officials in the newer methods of biological or integrated pest control. The overall outlook for Kazakstan with regard to agricultural chemicals gives cause for environmental optimism. The remiiaining years of this century are likely to see a continuation of the present low levels of pesticide applications, with decreasing use of the ecologically damaging chlorinated hydrocarbons as existing stock rull out. As the economy of the country improves and foreign manufacturers begin to provide stocks of the newer and more effective chemicals, pesticide use is likely to increase. This increase brings with it a renewed possibility of improper use, over-application, storage risks, and increased residues in the food of humans and livestock. 20. Considerable concern has been shown in recent years over the incidence of human diseases that appear to be linked to the quality of food and water consumed. The main culprits in these cases appear to be nitrates and heavy metals (HM) derived from irrigation water through vegetables and possibly meats. 21. The land under full irrigation is likely to increase as a result of an expanding population, scarcity of other inputs (pesticides, fertilizer, machinery), and failure to charge or collect full value for the water consumed. Scarcity of other inputs has reduced agricultural production, so additional irrigation has become one of the few options available for maintaining or increasing production. Provided that - 147 - Annex X energy supplies remain available at reasonable cost, more irrigation is likely to be applied by sprinkler because it makes more efficient use of the water and also produces less soil erosion than surface irrigation. 22. Expanded use of wastewater, especially on fodder crops, is highly likely. Kazakstan avoids water pollution by strictly limiting discharges. Wastewater, or even reservoir water that cannot be passed downstream, is often diverted into natural depressions to evaporate. Obviously, this practice cannot long continue in areas that are short of water. Thus, wastewater must be applied for its best available use. With chemical treatment to kill pathogens, sewage effluent could even be applied to irrigate edible crops. 23. Improved drainage, especially in areas prone to waterlogging, is a concern of very highi priority for residents of irrigated areas. Several sites were observed where houses had to be abandonied because the structural integrity of mud brick construction was compromised by waterlogged soils. Crop losses due to inadequate drainage are widespread. Discharges of return flow may be directed into sinks or rivers, into reservoirs for reuse, or into on-farm recycling. The receiving waters for return flows may be major environmental issues. 24. Return flows carry fertilizers and pesticides that are applied to crops. Concentrations of these compounds will increase in the future as use of these inputs returns to, or exceeds former levels. However, these waters are less mineralized than many waters that are in the lower reaches of many of the river systems. Discharge of return flows into rivers could be used as part of the strategy to control the salinization of the Aral Sea and Lake Balkhash. 25. The Ministry of Ecology and Bioresources (MOEB) is the principal agency tor environmental protection in Kazakstan, but numerous ministries contribute to the planning, monitoring and environmental review of this project, including the Ministry of Agriculture, the Kazak Academy of Agricultural Sciences, the State Committee on Land Relations and Land Management, the Ministry of Geology, the State Committee for Water Resources, the Hydrometeorological Service, and the Miinistry of Public Health. All ministries suffer from an acute shortfall in funding, prohibiting them from carrying out many of their basic functions. 26. As of the end of 1994, there was no special environmental law requiring impact assessment for irrigation development projects. In the middle of 1994, the MOEB issued "Temporary Instructions for the Assessment of the Ecological Impacts of Farm Development." The "Instructions" are still considered in force, pending the adoption of more detailed guidelines. Such guideliles were prepared by the authors of this SEA and presented to MOEB for possible adoption. The "Instructionis" call for a report in which available data on the resources likely to be affected by a project are analyzed in terms of scope and intensity, so that further research can be performed as required. An environmental assessment (EA) report is to be prepared by the project proponent and included with the feasibility report when this is submitted to approval. The report is to provide a brief description of ecological and social resources, and trends in agriculture. Natural resources that are especially sensitive to change should be identified, along with potential environmental problems. The report is given public review and then presented to Ministry of Ecology and Bioresources. MOEB reviews the EA and its comments (Stnic Ecological Expertise) are forwarded to those considering the project for approval. Similarly, SanitafN Expertise is carried out by the Ministry of Public Health. - 148 - Annex X 27. Currently there is no entity (unit) within the national office of the Ministry of Agriculture (MOA) responsible for environmental issues in the sector, although there is an environmental specialist in the Project Implementation Unit for this project. The MOA is responsible for self control and monitoring of reclamation land conditions on irrigated and drainage systems within the boundaries of state, collective and private farms. There are three regional monitoring units called Hydrologic Amelioration (or Hydrogeologomelioration) Expeditions under the MOA. They are responsible for monitoring of cropped areas, irrigation water use, soil and groundwater salinity and quality, preparation of water balance calculations and maps for all major irrigation systems in their region. 28. Surface water monitoring for developments under this project will be carried out by. Drainage and subsurface water monitoring will be performed by Hydrogeologymeliorative expeditions of MOA in Almaty, Zhambyl, Kzyl-Orda, Taldy-Korgan and South Kazakhstan oblasts, and by the Hydrometeorological Service in other oblasts. Land monitoring, as well as monitoring of agricultural products will be made by the agricultural chemical laboratory of Joint Stock Corporation "Kunarlylyk". They will also make plans for fertilizers application and, jointly with stations of plant protection, use of chemicals. 29. The project has many positive impacts, most notably a reduced use of irrigation water as a result of increasing the efficiency of irrigation systems. Proper design and practice of irrigation and drainage will also ameliorate soil in the fields and improve crop yields. In a simple sense, drainage removes pollutants from soil and transfers them to groundwater, which may need to be drained away from the fields. Quality of water to be drained from fields has been tested, and feasibility studies will include provisions of designs to maintain water quality suitable for fish production in any natural waters that receive drainage from sub-projects. Alternatively, drainage water of suitable quality may be reused for irrigation of crops. Water of poorer quality may be used to water forest belts adjacent to fields. If quality of drainage water is not sufficient for irrigation of forest belts, and it cannot be discharged into a natural water, drainage water must be diverted to an evaporation basin. This is the least preferred alternative, but newly created lakes may enhance regional ecology and economy. 30. The research and design agencies of the republic have proposed plans to mitigate environmental effects of sub-projects. The State Committee for Forestry and its forest reclamation stations are ready to design and construct forest reclamation belts to prevent wind erosion. "Kazmekhanobr" has proposed a method of cleaning of drainage discharge. The National Academy of Science proposes biological reclamation of salinized irrigated areas in rice fields by composting rice straw. Structure of the Ministry of Agriculture Is! Deputy Mill D y Dot D t Minlston -, 41r o ot ii 1inoloic foin b Scoenlilic & Engiiceing1 ton rec.h-o. Pouicy Lll foaming IAdninisiratiteh Main gncy oh Min Agncy ol Ini Agccyo lDeparinwntoT=Cical y In ogkal Polc lechn.c a r Settt,SpcfcW, Min Agen Plcy o_Slt Patr Vetrnay &sin Slat-e 2-nd Ieuimn Leaod Agenc of J~{_ r A,,, .,,'c s 1 MaiI Agency ot Fneelgn Relations &ecinte _ rr tiell$is i~~~~~~~~~~~~~Lcad=Mm Stl llknnurl">lnalu fo Pt~~~~~~~~~~~~~~~ .. S... . _ult . zclc f CK*e IDIP Organization Chart Council of Ministers of the Republic of Kazakstan lnterministerbal Stcering Committee Chairman: Ministcr MOA Sectrctary: Director PIU Members: MOEB Economy - Commitee Forcign Investments -- _ Finance - SCLR Construction - HS Committee for Water CWR - SANEPID I Resources MOA , CF - Farm Managers > ~~~PIU I _ _ _ _ / 2 I __ // | ~~~~~~~Management & EngineeringO b Consultant Group Foreign Kaziprovodhoz r Design/Construc-ion Rinal Water - I~~~~~~~~~~~~~~~~i ~~~~~~~~Management Farms,sndamers Supervision/Agencics Agency Fa wsj ufarmeri, Direct Supision -Construction Contractors jIdsra Lin~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ CoUro Sqii.ia LiLson~ ~ ~ ~ ~~jjjrjj Project Implementation Unit Miitrof Agriculture PIU Consultant SCOttrscts Director (Eng Design TA) De"t Director CoMtre Adnalai Ta XUInllit rt| Adilbtradve Uanit | oitwing and Evala"on llmit -PToean t Specmiuat - TecMnkaICoonin - Office Maager M StEffir - Support Staff - Agricurture Sptit - Intrprder -EnvkoncntalW SpecWisis Support Staff -Cost Recovery/Cr"dt Specbilst - Foer Participation Specialist - SupportStaff Minisiry of Ecology and Biological Resources Advifor First Deputy Regional and Deputy Mlnister, Mnun>CIpa Mlnister Chairman Forestry ..1 Inspection Ecoloc Offices ConrdStes UssoONacls alN AccatUnng S *g E=;j Agency 'GIawJivokhran3w 0lavrybokluanaw Central Agwacy Central Agemy CentralA .clo Departm ennol I Departmentol |t | l al I Heavy hdwltry, Ma perial toDepet ol | epa|tment NowoTechnlogyi PrEctcoo|| Future Prmlects | PiMehodotoeicao and Mat tIalo and Blmresources | |Evalain Ecdol Suppog nEvuatin Use Evauason Deput ,-Managenwnt Dkocim~ ~ ~ ~ - 153 - . Ss~~~ CharS r - ~~~~~~~~~~~~~~~~~~~~~~~. *I 1X ..l'' LUI -4.g - WA a IBRD 27736 50, 6& 70 SC Ye i~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ I - . R U S S I A N PETROPAVLOVSK F E D E R A T I 0 N Koy ZKUSTANAY KOKCHETAVD &CV HET \ PAVLODAR 3 SOw _URAL'SK S - , , * H_ vI.k.{ { \ i < - f > AK,: 068 ~~~~~~~~~~~~ ! , r. a , i 5~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Turkr" < >7:J f UZBEKISTAN I 3_ _______ AZERBAUAN 7.lI}2JRO L KAZAKSTAN CORE PROJECT LOCATIONS: IRRIGATION AND DRAINAGE FIRST YEAR SUAPROIECTS (I 996/I 971 SECOND YEAR SUL PROJECTS 1 997/1 9911 IESERVE SPROJECTS I I9w/2DO. IMPROVEMENT PROJECT 4 C4ENGILDY JSC IMPJWM9 STA #52 L_ DD4AMAUL FARM (TASHIUTKULI KERIULAK AND CHRONLDY FARMS - NJO CAPi A * KZYL AGASH P FRIRKOHNY FARM KAPO(AGA FARM f , ; NATKDNA CAPrTAL 70 WEVS. MAJKTAIAL DESRICT (GOLODNYA SEPEI C 60 YEARS OF OCTOBER FARM 003 PARTY CONGRESS FAtM 0r OBLAST CAPrrALS MOY FARM SARYOZENSI BaUAN-SHAOLAK FARM & BULAmfAL CANAL O SELE'SED CMES AKKUMSKY FARM E KIASNAYA POLYANA LERIN FARM MtTOGOKY Xf VWNTLINE (KIALllEK FARM I T A J I K I S T A N RrVFR RASIN BOUNDARIES ( flKARKYN FARM * OBLAST BOUNDARIES U70 YARSFOCTOVFRR FR ) -t - -INTERNATIONAL BOL)NDARIES D4AKMET FARM (KOKSUI; KILOMETES MEZHEROV FARM (KOKSU) 10D 20 300 0 500 500 TAMAMTY FARM __ I I_r AMITASKJNSKI FARM AFGHANISTAN 70Y 00 500 30 400 mAY 1996 IMAGING Report No: 15379 KZ Type: SAR